Creative Accounting Practices Research Articles

The Influence of External Auditing in Limiting the Creative Accounting Practices in SMEs

This study aims to identify the role of external auditing in limiting the practice of creative accounting among Small and Medium Enterprises (SMEs) in the Kingdom of Saudi Arabia. Creative accounting involves providing fraudulent numbers and may be contained through efficient external auditing and the use of the rules and conduct of professional ethics. To achieve study objectives, a descriptive approach was taken by conducting a field study using a comprehensive inventory method. To suit the nature of the study, this method targeted all audit offices not licensed to practice with joint-stock companies. A questionnaire was used to collect data from the study population, and SPSS was used to analyze the results. The study results indicate that efficiency in external auditing contributes to limiting the practice of creative accounting among SMEs through procedures and audit plans, optimal use of resources (e.g., auditors), and knowledge and use of the rules and conduct of professional ethics. This study also composed a set of proposals to serve practitioners and decision makers, including measures that ensure and develop procedures in audit offices that contribute to discovering and reducing illegal practices. KEYWORDS accounting offices, auditing efficiency, financial statements, fraudulent accounting, professional conduct, professional ethics

Impact of Auditors' Attributes on the Identification of Creative Accounting Practices in Pakistan

Accounting creativity is the process of changing financial information beyond the limits of accounting norms to provide an improved overview of a company's financial status and performance. The current study investigates creative accounting practices in Pakistan, focusing on auditors' competency, integrity, independence, and ethics in detecting creative accounting practices, thereby enhancing financial transparency in the business context. The data for the study were collected via a questionnaire using a Google Web form shared with 120 auditors from audit organizations working in Pakistan. The results of multiple regression analysis revealed that auditor competency, honesty, independence, and ethics have a significant influence on detecting creative accounting practices followed by accountants to manipulate the financial position and performance of their organizations. The results of this study hold significant practical implications for auditors, regulators (such as the SECP), and policymakers. Future research may be focused on assessing the efficacy of audit committees in overseeing companies' stakeholder reporting and their management of ethical and sustainability concerns. This study contributes to the literature by exploring the realm of accounting creativity in Pakistan, specifically delving into auditors' capabilities and integrity in identifying creative accounting practices. It sheds light on the significance of auditors' competency, honesty, and ethical considerations in uncovering manipulative financial reporting strategies employed by accountants.

Effect of Creative Accounting on the Financial Performance of Listed Deposit Money Banks in Nigeria

The list of recent cases of creative accounting practices is growing as many financial institutions in Nigeria are being investigated. As a result, this study examined the effect of creative accounting on the financial performance of listed deposit money banks in Nigeria. For this study, secondary data were explored, and the study adopted an ex-post facto research design. The population of this study comprised all the nineteen (19) deposit money banks listed on the Nigerian Exchange Group as of December 31 2022, and ten (10) banks were selected as sample size using purposive sampling techniques. Data were analysed using the panel multiple regression technique (fixed effect regression model) with the help of Statistical tool, E-views version 12.0. The study found that Non-performing Loans exert a positive and significant influence on the Return on Equity of the listed deposit money banks; Capital Adequacy Ratio has a negative but significant effect on Return on Equity; Gross Earnings Ratio has a positive but insignificant effect on Return on Equity; and Loan-to-asset Ratio posited a negative but significant effect of on Return on Equity. The study recommends that proactive measures to identify, assess, and mitigate credit risks can help minimise the adverse impact of non-performing loans on financial performance.

The Role of Corporate Governance Mechanisms in limiting Creative Accounting Practices: A View from Specialists in Middle East Countries

The Role of Corporate Governance Mechanisms in limiting Creative Accounting Practices: A View from Specialists in Middle East Countries

The Effect of Ethical Knowledge, Religiosity and Moral Reasoning on Accounting Student’s Perception of Creative Accounting Practices

ABSTRACTThis study aims to knows the effect of ethical knowledge, religiosity and moral reasoning on the accounting student’s perception of creative accounting practices. The population uses accounting students of Yogyakarta State University (UNY) and Universitas Muhammadiyah Yogyakarta (UMY). The sample were 147 respondents. Data analysis is based on multiple linear regression analysis. The results showed that ethical knowledge positively influences the perception of accounting students regarding creative accounting practices, religiosity does not affect the perception of accounting students regarding creative accounting practices and moral reasoning has a positive effect on accounting students' perceptions about creative accounting practices. Additional testing for different test show ethical knowledge has significant different whereas religiosity and moral reasoning no significant different between accounting student’s UNY and UMY.Keywords: Knowledge of Ethics, Religiosity, Moral Reasoning, Creative Accounting PracticesABSTRAKPenelitian ini bertujuan mengetahui pengaruh pengetahuan etika, religiusitas dan moral reasoning terhadap persepsi mahasiswa akuntansi mengenai praktik creative accounting. Populasi menggunakan mahasiswa Prodi Akuntansi Universitas Negeri Yogyakarta (UNY) dan Universitas Muhammadiyah Yogyakarta (UMY). Sampel sebesar 147 responden. Analisis data menggunakan analisis regresi linear berganda. Hasil penelitian menunjukkan pengetahuan dan etika berpengaruh positif terhadap Persepsi mahasiswa akuntansi mengenai praktik creative accounting, Religiusitas tidak berpengaruh terhadap persepsi mahasiswa akuntansi mengenai praktik creative accounting dan moral reasoning berpengaruh positif terhadap Persepsi mahasiswa akuntansi mengenai praktik creative accounting. Tes tambahan untuk uji beda menunjukkan pengetahuan etika mempunyai perbedaan signifikan sedangkan religiusity dan moral Reasoning tidak mempunyai perbedaan signifikan antara mahasiswa prodi akuntansi di UNY dan UMY.Kata Kunci: Pengetahuan Etika, Religiusitas, Moral Reasoning Praktik, Akuntansi Kreatif

Creative Accounting Practices and the Credibility of Financial Reports: An Empirical Study on the Jordanian Commercial Banks

This study examines the impact of creative accounting practices on the credibility of financial reports in Jordanian commercial banks. It highlights the use of innovative accounting techniques and manipulative strategies employed by firms to present accounting information misleadingly, thereby influencing the judgments of financial statement users. The research aims to investigate the influence of these practices on the reliability of financial reporting in Jordanian commercial banks. A questionnaire was developed and distributed to senior and middle management as well as workers in Jordanian commercial banks, with 51 usable responses out of 80 participants. The findings reveal a negative impact of creative accounting practices on the credibility of financial reports in Jordanian commercial banks. The study concludes by recommending that regulatory bodies in Jordan adopt policies to detect and address creative accounting methods in financial statements and develop deterrent laws with penalties and sanctions for those engaging in harmful techniques in creative accounting.

Creative Accounting Practices and Shareholders Wealth: Evidence from Deposit Money Banks in Nigeria

The study investigated the relationship between creative accounting practices and shareholder’s wealth of deposit money banks (DMBs) in Nigeria within the period of 2008-2020. Its specific objectives were to investigate the relationship between the Income smoothing and return on equity, and Inventory manipulation and return on equity of DMBs in Nigeria. The cross- sectional survey research design was adopted for the study; the population of the study was all the 14 DMBs listed in Nigerian Exchange as at December 2021. Using purposive sampling technique, 5 deposit money banks were sampled and 74 respondents comprising accountants, auditors and compliance officers across the selected DMBs were used. 64 adequately completed and returned copies of questionnaire was used for the study analysis. Copies of questionnaire was used for data gathering. Univariate and Bivariate analysis was done. Regression analysis and model Statistics was used for data analysis and testing of hypothesis with the aid of SPSS. The result of the study shows that creative accounting dimensions of income smoothing and inventory manipulation have strong, positive and significant relationship with shareholder’s wealth measured in terms of return on equity (ROE). The study concluded that creative accounting affects shareholder’s wealth thus the need to checkmate the practice so that shareholders would actually know the true worth of their investment, not that which is coated that ends up giving them false hope in the long run. The study recommended that: Bank regulators should evaluate the adequacy of policies around inventory and assets valuation and at the same time, financial analysts and shareholders should note the application and consistency of accounting policies on inventory and assets. This way where inventory records have been manipulated can be discovered. There should be a review of the ownership structure of banks. There should be more dispersed ownership to include

Forensic Accounting: A Tool to Alleviate Creative Accounting

Forensic Accounting is the domain of Accounting which curbs the irregularity of accounting practices as created by Creative Accounting. Forensic Accounting includes the unique knowledge and vigilant skills utilized to combat financial fraud and check up on the deliberate practices in the books of accounts maintained under the loopholes of accounting principles. This paper researches to investigate the dimension of forensic accounting and its measures. The paper also emphasizes the creative accounting practices in India, envisages the problem, and provides the needed solution through Forensic accounting. This research article discusses the concept of forensic accounting and its vital role in a corporate organization.

Effects of Corporate Governance on Creative Accounting Practices: Evidence from NSE-listed Companies in India

This paper investigates the effects of corporate governance on creative accounting practice in Indian NSE-listed public companies. To get insights and analysis of how mitigating effects of governance issues can impact creative accounting practices, a specific set of factors is identified and the multistage technique design is employed to collect samples of 51 companies with 255 firm-year observations for the years 2017–2021. The value of discretionary accrual as estimated using the modified Jones model. The panel data are used for analysis and testing the hypothesis with the help of Stata 15 version statistical software. The results of this study demonstrated that only audit independence has a considerable negative influence on creative accounting practice, indicating that increasing the number of audit independence could reduce unethical accounting manipulation in financial reporting practice. The paper digs further and provides additional details that the board size, return on asset and firm growth significantly appears under a flag of positive creative accounting practices. In contrast, the board’s independence, audit committee, firm size and leverage have no such influence on creative accounting practice. The study also recommends that companies should have an independent audit committee, so as to minimise the accounting irregularities in financial reports.

The Impact Relationship Between Accounting Disclosure and Creative Accounting in the Environment of Iraqi Banks

Purpose: The research aims to demonstrate the impact of disclosure as an accounting standard to reduce any manipulation of bank profits, when using creative accounting, and improve the performance of bank departments, especially senior management, which is the main cause of profit manipulation, and to indicate the extent of the impact of accounting disclosure as an accounting standard to reduce creative practice. Theoretical framework: The study shows the effect of accounting disclosure as an accounting standard, to reduce creative practice, and disclosure as an accounting standard, one of the most important of these criteria used, which is the course through which details are presented and the decisions are submitted to the policy followed by the facility (Hassan, 2010: 25) Design/methodology/approach: For the purpose of completing the study, a sample of the banking sector was chosen in the Iraqi environment, where (13) banks were chosen, namely (Commercial Bank- Investment Bank- Ashur Bank- Investment Bank- Gulf Bank- United Bank- Middle East Bank- Al Mansour Bank- Mosul Bank- Bank Baghdad - Somer Bank - Al -Ahly Bank - Credit Bank - Al Ittihad Bank). Sound and correlation and influence laboratories have been used to extract results Findings: The results of the descriptive analysis showed that there is no weakness in the level of disclosure in Iraqi banks, during the study period, and the values of proportions indicate a relative rapprochement between banks in the terms of disclosure. Research, Practical & Social implications: The study shows the effect of applying disclosure as an accounting standard in reducing creative accounting practice. Originality/value: The results of the statistical analysis showed that the value of (ProB) for the independent variable apply the disclosure as an accounting standard less than (0.05), as it reached (0.017), which indicates that there is a reverse moral impact to apply disclosure as an accounting standard No. (1) on creative accounting.

Effect of Creative Accounting Practices on Solvency of Selected Deposit Money Banks Quoted in Nigeria

The purpose of deposit money banks is to maximize solvency by acting as an economic intermediary between economic sectors that are in deficit and those that are in surplus. One of the main goals of deposit money banks' existence is to achieve solid bank solvency. However, fraud manner of using creative accounting measures in manipulating bank financial information has resulted to insolvency and collapsed of deposit money banks in Nigeria. The objective of the study is to examine the effect of creative accounting practices (cash assets structure, equity capital structure, loan structure, deposit liability and accrual quality) on solvency of selected deposit money banks quoted in Nigeria. The population of the study comprised of all the nineteen (19) listed deposit money banks as at December, 2021 while a targeted random sampling technique was adopted to select the sample size of ten (10) failed banks and seven (7) surviving commercial banks listed in Nigeria Stock Exchange (NGX). Ex post facto research design was adopted using dataset for the period 2006–2021 which were collated from the annual reports and financial statements of the listed deposit money banks. The data collected were analyzed using mean scores and Panel Regression Model method. The analysis revealed that three of the proxies of creative accounting such as cash assets structure, equity capital structure and deposit liability negatively but insignificantly influenced the survival of the DMBs, accrual quality is having a negative and significant effect on survival of the banks while only loan structure is having a positive but insignificant effect on survival of the DMBs on bank solvency (AdjR²= 0.258, F= 12.07: p < 0.05); while for failed banks, it was revealed that cash assets structure, and equity capital structure have positive and significant effect but equity capital structure has negative and significant effect while loan structure, deposit liability and asset quality have positive and insignificant effect on bank solvency (AdjR²= 0.33, F= 7.38: p < 0.05). The study concluded that creative accounting measures affect bank solvency in Nigeria. Therefore, the study recommended that bank managers should endeavor to employ accounting measures based on global and accounting standard so as to enhanced bank solvency among deposit money banks in Nigeria.

EFFECT OF CREATIVE ACCOUNTING PRACTICES ON CREDIT RISK MANAGEMENT OF SELECTED DEPOSIT MONEY BANKS QUOTED IN NIGERIA

Sound credit risk management is one of the criteria for deposit money banks to carry out efficient financial intermediation in developed, emerging and developing economies including Nigeria. However, the manipulation of bank financial data by fraud utilizing inventive accounting techniques led to the poor credit risk management and collapse of deposit money institutions in Nigeria. The objective of the study is to examine the effect of creative accounting practices (cash assets structure, equity capital structure, loan structure, deposit liability and accrual quality) on credit risk management of selected deposit money banks quoted in Nigeria. The population of the study comprised of all the nineteen (19) listed deposit money banks as at December, 2021 while a targeted random sampling technique was adopted to select the sample size of seven (10) failed banks and seven (7) surviving deposit money banks listed in Nigeria Stock Exchange (NGX). Ex post facto research design was adopted using dataset for the period 2006–2021 which were collated from the annual reports and financial statements of the listed deposit money banks. The data collected were analyzed using mean scores and Panel Regression Model method. The analysis revealed that for surviving banks, creative accounting had a significant influence on credit risk management (Adj.R2 = 0.182, Wald-Test= 4.44 :p &lt; 0.05). Therefore, the study recommended that the management team of the banks should ensure that credit portfolio of the deposit money banks is prudently managed to grow year on year in the right mix and without contravening the statutory guidelines to avoid bad and doubtful loan classifications so as to achieve sound credit risk management.

Antecedents and effect of creative accounting practices on organizational outcomes: Evidence from Bangladesh

This study examines the antecedents and effects of creative accounting practices (CAP) on organizational outcomes in Bangladesh. Thus, this research recognizes the antecedents of creative accounting, such as sustainable financial data (SFD), political connections (PC), corporate ethical values (CEV), future company orientations (FCO), and corporate governance practices (CGP). And also examine how the quality of financial reporting (QFR) and decision-making effectiveness (DME) are influenced by CAP. This study incorporates these fundamental antecedents of creative accounting practices on organizational outcomes by collecting survey data (n = 354) from publicly traded companies in the Dhaka Stock Exchange (DSE), Bangladesh. The study model has been tested through the “Partial Least Square- Structural Equation Modelling” (PLS-SEM) technique using Smart PLS v3.3 software. In addition, we pass various model fit measures, i.e., reliability, validity, factor analysis, and goodness of fit. This study finds that SFD does not work as an antecedent of creative accounting practices. But, the outcomes of the PLS-SEM confirm that PC, CEV, CFO and CGP work as an antecedent of CAP. Furthermore, the results of PLS-SEM also confirm that CAP influence the QFR in the positive direction and CAP influence the DME in the negative direction. Finally, QFR has a positive and significant impact on DME. Any study that has tested the impact of CAP on QFR & DME is yet to be found in the literature. However, policymakers, accounting bodies, regulators, and investors can consider these findings to formulate policy and investment decisions. Mainly, organizations can focus on PC, CEV, CFO and CGP to reduce CAP. But organizations need QFR and DME, which are critical components of organizational outcomes.

The Role of Internal Audit as a Corporate Governance Mechanism in Limiting Creative Accounting Practices: The Case Study of Libyan Commercial Banks

The Role of Internal Audit as a Corporate Governance Mechanism in Limiting Creative Accounting Practices: The Case Study of Libyan Commercial Banks

Earnings management model for Visegrad Group as an immanent part of creative accounting

Research background: Creative accounting practices do not frequently violate the law and are not considered illegal; however, accounting managers may exploit legal ambiguities to portray the company's financial standing in accordance with management preferences. Therefore, the analysis is focused on the detection of earnings management in companies operating in the Visegrad Group, which represents one of the most commonly used techniques for revealing creative accounting. Purpose of the article: The aim of the presented study is to reveal the presence of creative accounting through the detection of earnings management in the countries of the Visegrad Group and, based on the detected results, to propose a regression model of earnings management in the Visegrad Group. Methods: To reveal the use of creative accounting in the Visegrad Group, ten selected models of earnings management were applied during the period 2016?2020 to a set of 8,134 companies. The Mann-Whitney test and multiple linear regression were used to verify the existence of earnings management. These findings served as the basis for the creation of the linear regression model of earnings management in the Visegrad Group. Findings &amp; value-added: The presence of earnings management was best captured by the Hribar and Collins model in companies operating in the Visegrad Group in the period 2016?2020. The findings also confirmed that positive discretionary accruals acquired higher values over the entire period when compared to negative discretionary accruals, confirming that companies in the surveyed group manage their profits primarily by increasing them. Therefore, we created a regression model, that can serve as a unique basis and is capable of revealing the use of earnings management in the Visegrad Group, as until now nothing like this has been implemented in these countries. In conclusion, this study offers insights for academicians and researchers on creative accounting in the selected period. Lastly, the study contributes to the existing theory by conducting new research on the earnings management determinants of the countries studied.

Factors Implanted in the Successful Implementation of Forensic Accounting: An Empirical Study on Academicians and Practitioners

This study aimed at exploring factors implanted in the successful implementation of forensic accounting emphasizing both organizational and people derived factors. Organizational factors were limited to information technology solutions and creative accounting practices, while people factor was related to knowledge, skills, and experience. Prior research was reviewed for two purposes. First, to lay the foundations of research theoretical framework and hypotheses development. Second, to develop the questionnaire of the study by which the required data were gathered. A sample of academicians and practitioners comprising 120 participants was purposively selected. A total of 107 responses were used in the statistical phase, which was carried out with IBM SPSS and AMOS. The results showed that information technology solutions, absence of creative accounting practices, forensic accounting education, forensic accounting training, and forensic accountants’ experiences were significant predictors of the successful implementation of forensic accounting. Based on the results, this study contributes to the literature of forensic accounting by providing evidence on organizational and human factors that affect the successful implementation of forensic accounting. In addition, the results offer insightful educational and managerial implications. Universities, organizations, and accounting firms are recommended to consider the suggested model in order to elevate their implanting of forensic accounting efforts to detect fraud crimes.

The Effect of Stock Ownership, Independent Board of Commisioners and Characteristics of the Audit Committee on Creative Accounting Practices

The Effect of Stock Ownership, Independent Board of Commisioners and Characteristics of the Audit Committee on Creative Accounting Practices

Forensic Accounting Methods and Reducing Creative Accounting Practices: Evidence from Jordan

This study aims to investigate the role of forensic accounting methods in reducing creative accounting practices in Jordan as a developing country. The targeted population consisted of 357 respondents from auditing accounting working in auditing offices in Amman. A self-administrated questionnaire was used as an instrument for data collection and multiple-regression analysis was employed for data analysis.&#x0D; The study findings indicated that three factors could be extracted from forensic accounting methods; namely, investigation operations, procedures and evaluation processes. These factors (methods) showed to have a positive relationship with reducing creativity accounting practices from auditors’ perspective in Jordan. The most crucial forensic accounting method (factor) that proved to be highly associated with reducing creativity accounting practices was the “procedures” method

ACCOUNTING FRAUD IN CORPORATE: CASE STUDY ON SATYAM COMPUTERS LIMITED

In the modern globalized and liberalized era, the firms are facing stiff competition and are under pressure to show the good financial results through financial reporting. In such an environment, they start using the creative accounting practices, especially in unsuitable situation to boost up the profit or manipulate the assets and liabilities to report to the stakeholders the image that is better than the actual image. Corporate accounting fraud is a major problem that is increasing both in its frequency and severity. Research evidence has shown that growing number of frauds have undermined the integrity of financial reports, contributed to substantial economic losses, and eroded investor’s confidence regarding the usefulness and reliability of financial statements. An attempt is made in this paper to examine in-depth and analyse India's Enron, Satyam Computer's " creative-accounting " scandal. Satyam was brought to its knee due to 'tunnelling' effect. The Satyam scandal highlights the importance of securities laws and Corporate Governance in emerging markets. Their scandal/fraud has put a big question mark on the entire corporate governance system in India. Indeed, Satyam fraud "spurred the government of India to tighten the CG norms to prevent recurrence of similar frauds in future. Thus, major financial reporting frauds need to be studied for “lessons-learned” and “strategies-tofollow” to reduce the incidents of such frauds in the future. Thus this paper is devoted to the case study of Satyam, its creative accounting scandal and the effect of it on the global market.

Global Ethical Consideration and Accounting Practices in Nigeria

The poor culture of accounting practices in Nigeria, as well as manipulation of financial statements have attracted the attention of scholars’ overtime to question the role of global ethics on accounting practices in Nigeria. In view of this, the main objective of this study dealt on the conceptual review of global ethical consideration and accounting practices in Nigeria. The study employed a review of literature by past researchers on the discourse. In conclusion, the study found that in Nigeria the culture of accounting promotes creative accounting practices, income smoothing and window dressing. Based on the findings, the study recommended that culture should be given adequate consideration in enforcement of global ethical rules and regulation among practicing accountants in Nigeria. Furthermore, professional bodies like Institute of Chartered Accountants of Nigeria ICAN, Association of National Accountants of Nigeria and financial reporting council of Nigeria. Should work in concensus in order to comply effectively with IFRS and global ethical rules and regulations.