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Abstract Financial statements should depict the true and fair view of the companies. In today’s c... more Abstract
Financial statements should depict the true and fair view of the companies. In today’s competitive environment companies are trying their best to enhance their earnings and create goodwill and confidence amongst the stakeholders. Companies desire to present the reports with the profits growing steadily have led to numerous accounting scandals over the past decades such as Enron, Anglo-Irish Bank, Satyam Computer Services, Lehman Brother, Autonomy Corp.This reveals that at least some accountants can be extremely creative with their finances they control.Such practice adversely affects the decision of different users of the financial statements. Creative accounting has emerged as a new way of manipulating financial statements of the companies.Certain loopholes in Indian Accounting Standards are facilitating the companies to indulge in such malfeasance to earn huge profits or save taxes. Account manipulation attempts to show different financial results than what they actually are. The research paper consists of the study which has been conducted to identify the different motives of creative accounting and to find various measures to prevent such malpractice. Our exploratory study examined and reviewed historical facts and past literature. To address this issue a questionnaire was administered to 30 respondents. The study revealed that all the respondents were aware about the creative accounting practice but the detection of creative accounting is difficult as it is practiced within the framework of accounting system. This problem is not only confined to India but is present in all the international companies too. The study concludes that there is need for stronger enforcement and monitoring mechanism for International Financial Reporting Standards in India. Streamlining the accounting and auditing system and enhancing the practice of corporate governance appears to be the engines to make the accounting more objective and transparent.
Keywords- creative accounting, financial statements, manipulation, accounting standards.
Abstract Financial statements should depict the true and fair view of the companies. In today’s c... more Abstract
Financial statements should depict the true and fair view of the companies. In today’s competitive environment companies are trying their best to enhance their earnings and create goodwill and confidence amongst the stakeholders. Companies desire to present the reports with the profits growing steadily have led to numerous accounting scandals over the past decades such as Enron, Anglo-Irish Bank, Satyam Computer Services, Lehman Brother, Autonomy Corp.This reveals that at least some accountants can be extremely creative with their finances they control.Such practice adversely affects the decision of different users of the financial statements. Creative accounting has emerged as a new way of manipulating financial statements of the companies.Certain loopholes in Indian Accounting Standards are facilitating the companies to indulge in such malfeasance to earn huge profits or save taxes. Account manipulation attempts to show different financial results than what they actually are. The research paper consists of the study which has been conducted to identify the different motives of creative accounting and to find various measures to prevent such malpractice. Our exploratory study examined and reviewed historical facts and past literature. To address this issue a questionnaire was administered to 30 respondents. The study revealed that all the respondents were aware about the creative accounting practice but the detection of creative accounting is difficult as it is practiced within the framework of accounting system. This problem is not only confined to India but is present in all the international companies too. The study concludes that there is need for stronger enforcement and monitoring mechanism for International Financial Reporting Standards in India. Streamlining the accounting and auditing system and enhancing the practice of corporate governance appears to be the engines to make the accounting more objective and transparent.
Keywords- creative accounting, financial statements, manipulation, accounting standards.