Creative Accounting - 1022 Words

Creative Accounting Creative accounting is a term that often implies illegal or fraudulent practices in the U.S. (Moneyterms, 2006). The objective of the following paragraphs is to explore some definitions of creative accounting from different perspectives, discuss some advantages and disadvantages of creative accounting, and explain a real life example of creative accounting. Through these paragraphs I hope to also touch upon some of the ethical issues involved in engaging in creative accounting practices. Definitions of Creative Accounting From Different Perspectives Blake (1998) provides four definitions of creative accounting provided from different perspectives. The first perspective was written by a business journalist: â€Å"Every†¦show more content†¦Many other disadvantages could arise through the use of creative accounting as well. Real Life Example of Creative Accounting When businessmen hear the name Bernard Madoff, some of the things that come to mind are liar, swindler, scandalous, manipulator, creative accountant, and many more. Some may even think of Bernard as a genius as he pulled off the largest creative accounting scheme in U.S. history, and recently pleaded guilty to his actions (Glovin, 2009). Basically, Madoff was able to secure billions of dollars of investment funds money from his clients by paying those that withdrew money with money from clients that were new to deposit money in to funds. Clients would happily keep their funds invested with Madoff because he would report large profits to the investors, even though he was taking the money, but the investors felt secure with the reports given to them that showed the false numbers. â€Å"They were blinded by the fees they were earning.† said William Glavin, according to Glovin (2009). Over time, he was able to stealShow MoreRelatedThe nature, incidence and ethical issues of creati ve accounting4406 Words   |  18 Pagesethical issues of creative accounting 1.1 Introduction Creative accounting is also called â€Å"Earnings management† which is known as the manipulation of financial information. The term can be defined in many ways. Initially we define it as a process whereby accountants use their knowledge of accounting rules to manipulate the figures reported in the accounts of a business (Naser, 1993, p.59). Creative accounting, at root, is the origin of numerous accounting frauds. Many accounting scandal casesRead MoreWhy The Creative Accounting Is Important Factors Essay2581 Words   |  11 PagesAlthough the relevant accounting and financial standards, regulations, and frameworks are established for the fair and reliable presentation of financial reports, there are still fraud issues from manipulating financial information. 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This means not only must an accountant follow the law, but also be able to interpretRead MoreDescribe the Strategic Management Failure in Enron That Led It Into Its Demise?1155 Words   |  5 Pagesmoney losing Broadband Division was said to be worth $29 Billion or $37 a share. Excitement among investors and share holders and false accounting drove the share prices up. To support their false rate of growth Enron had to borrow more to fund capital projects. More borrowing meant higher debt levels which in turn weakened their earnings. Enron’s creative accounting strategies and partnerships then allowed for debt not be reflected on the balance sheets, artificially improving their forecasts. AnRead MoreCausal Effect of Creative Accounting on Financial Reporting and Decision Making.1075 Words   |  5 Pages CAUSAL EFFECT OF CREATIVE ACCOUNTING ON FINANCIAL REPORTING AND DECISION MAKING. (A Survey of Selected Financial Institutions in Nigeria)-jetibensi@yahoo.com By: Jackson Etibensi A Concept Note Submitted to the University of Calabar, Graduate School as Prerequisite for Admission into MSc. Accounting, Faculty of Management Sciences. INTRODUCTION: Financial Statements provides information that is used by interested parties (users) to assess and appraise the performance and financial Status ofRead MoreWeek 1 Acc5561135 Words   |  5 Pagesreview before proceeding with the bid. The information covered will include: * The effect of occupational fraud and abuse on the company * U.S. governmental oversight of accounting fraud and abuse and its effect on the company Potential corruption schemes to be aware of in the company Recommendation of types of accounting evidence and methods of gathering such evidence to support the financial status review. 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This case is known as one of the biggest accounting frauds in the corporate history of the U.S. This paper will analyze who was affected by this fraud, the motives behind it and what systems of control failed to prevent it. The major groups that were directly affected are investors, employees