The role of Creative Accounting and its impact on the Credibility of Accounting Reports of Management

Abstract

It was unclear whether or not investors and other stakeholders could trust the data presented in accounting reports and disclosures, which are intended to help them make educated judgements about the value of their holdings. Creative accounting is blamed for the failure of these relationships to live up to expectations. While many academics believe this technique is immoral and should be stopped, others argue that despite its role in contributing to business failures, investment losses, and economic crises, it is still a valid and important activity. This article evaluates how much this innovation has led to corporate failures, why these practises have emerged, and what obstacles they provide to accurate reporting and open disclosure from management. When compared to the findings of similar investigations, the present findings were different. According to research, underreporting of a company's financial performance is caused by accounting professionals being creative with their numbers. The inventiveness behind these methods is driven by avarice and serves to mislead the general public, potential investors, and shareholders while simultaneously increasing the rate at which firms fail. According to the research, however, the foundation for management's fake, aesthetic, and unjust reporting is a plethora of laws without proper controls, sanctions, and rewards.