Use or Abuse of Creative Accounting Techniques

The study has been conducted to have a detailed view on creative accounting. A very important question has been tried to be answered in this study that why managers do creative accounting and how they become successful in performing such practice in the presence of stringent rules and procedures. Another aspect of creative accounting has been tried to be explored that whether this creative accounting practice is good for the companies or it brings companies in crises situation. Discussion based model has been used on the basis of past references and experiences. Link of governance with creative accounting practices has also been tried to be explored in the study. At the end it is concluded that the complex and diverse nature of the business transactions and the latitude available in the accounting standards and policies make it difficult to handle the issue of creative accounting. It is not that creative accounting solutions are always wrong. It is the intent and the magnitude of the disclosure which determines its true nature and justification.

Keywords: creative accounting, earnings management, corporate governance

JEL Classification: M41, G34

Suggested Citation: Suggested Citation

Ali Shah, Syed Zulfiqar and Butt, Safdar Ali and Bin Tariq, Yasir, Use or Abuse of Creative Accounting Techniques (October 1, 2011). International Journal of Trade, Economics and Finance, Vol. 2, No. 6, 2011, Available at SSRN: https://ssrn.com/abstract=2009823