Management as Cause and Mechanism of Creative Accounting Prevention

Knežević, Goranka; Mizdraković, Vule; Arežina, Nada

doi:10.7595/management.fon.2012.0001

Cited by 3 publications

(5 citation statements)

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“…Based on a sample of 159 certified accountants, the results show that the majority of respondents understand that (1) Portuguese companies develop AEMP, (2) AEMP has a significant impact on the FS, (3) the main hampered the AEMP are state, companies, and society, (4) there is a need to mitigate the AEMP and the main instruments for this are the establishment of more precise and concrete accounting standards and sanctions, in line with the results obtained in the study by Bhasin (2016), ( 5) and that audit committee and efficient internal control are corporate governance mechanisms AEMP's able to mitigating of AEM development, corroborating the results of Bhasin (2016), Tassadaq and Malik (2015) and Knežević et al (2012). In addition, this research proves that certified accountants' characteristics, as professional experience and educational qualifications significantly influence their perception of the need to mitigate the AEMP.…”

Section: Discussionsupporting

confidence: 82%

“…In India, independent directors and the audit committee are the essential instruments in reducing AEMP, according to certified accountants (Bhasin, 2016). In Serbia and Pakistan, audits represent the main instrument AEMP able to suppressing AEM (Knežević et al, 2012;Tassadaq and Malik, 2015).…”

Section: Data Analysis and Discussionmentioning

confidence: 99%

“…The change in accounting practices to report the company's real performance is not considered earnings management unless this change is substantiated to distort FI (Vladu and Matis, 2010). Regarding the acceptability of AEM, it varies from author to author, however, it is often perceived as reprehensible (Gowthorpe and Amat, 2005), because they have a fallacious effect (Knežević et al, 2012).…”

Section: Discussionmentioning

confidence: 99%

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Practices and mechanisms to mitigate the negative effects of accountingbased earnings management: An empirical study from the professionals’ perspective

Monteiro¹,

Accounting²

2021

Int. j. adv. appl. sci.

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Accounting conservatism and Accounting-based Earnings Management Practices (AEMP) introduce bias in financial information (FI), thereby influencing stakeholder behavior in the decision-making process. This study aims to analyze, from the certified accountants’ perspective, the AEMP in Portugal. Specifically, it analyses (1) the development of the AEMP and its impact on FI reporting, (2) the main hampered on its implementation, and (3) the need for the instruments and corporate governance mechanisms to mitigate the AEMP. Besides this research analyses (4) the relationship between the certified accountant’s characteristics (gender, age, professional experience, educational qualifications, and training area. To achieve the proposed objectives, we have used a quantitative methodological approach with a survey questionnaire, conducting an empirical study based on a sample of certified accountants. Based on a sample of 159 certified accountants, the results found that the majority of respondents indicate that Portuguese companies develop AEMP and that these practices have a negative and significant impact on the quality of financial statements (FS). Moreover, most certified accountants point out that is important to adopt measures that will prevent the abuse of AEMP and the main instruments for this are the establishments of more precise and concrete accounting standards and the application of the sanctions. The results also indicate that the audit committee and efficient internal control are corporate governance mechanisms AEMP able of mitigating the effects of the AEMP. Finally, the individual characteristics of certified accountants, such as professional experience, educational qualifications, and training area, significantly influence their perception of the need to mitigate the AEMP. This study presents relevant contributions to theory and practice. First, it develops the literature that evaluates AEMP, particularly in Portugal, where studies are scarce. Second, this study is original because it considers the relationship characteristics of accounting and AEMP professionals. Third, it allows entities that operate in accounting standardization and for accountants and FI users to have a more in-depth knowledge of the AEMP’s instruments and mechanisms.

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Section: Discussionsupporting

confidence: 82%

Section: Data Analysis and Discussionmentioning

confidence: 99%

Section: Discussionmentioning

confidence: 99%

See 1 more Smart Citation

Practices and mechanisms to mitigate the negative effects of accountingbased earnings management: An empirical study from the professionals’ perspective

Monteiro¹,

Accounting²

2021

Int. j. adv. appl. sci.

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“…Amat et al (1999Amat et al ( , 2003 gave in the role of ethics which are to be taken into account while preparing the FS, wherein Baralexis (2004) in his search tried to answer, "why, how and to which extent the CA is responsible." Knezevic et al (2012) used a primary survey to study the effect and impact of CA on FS in Serbia, whereas a similar study was done in Romanian where several companies were studied to conclude the level of knowledge on the managers while calculating CA. Laura and Ileana (2013), Balaciu et al (2014) and Momani and Obeidat (2013) took into account the role of the auditor and his knowledge into relation for the inapplicability of CA.…”

Section: Related Studies On Creative Accountingmentioning

confidence: 99%

Creative accounting a tool for financial crime: a review of the techniques and its effects

Gupta

Kumar

2020

JFC

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Purpose The purpose of this paper is to study the concept and procedure of creative accounting as how is it worked around and how it can lead to financial crimes. The procedure which are followed and which are the people who are involved and who are the victims of such crimes. The methods which are used to perform the action and how is it done. What are the findings of different researchers who have studied the same concept and how can it be curbed is the main purpose of the paper. Design/methodology/approach This paper is designed to find out the working of accounting policies and how the loopholes in the same can actually be taken into account, resulting in a certain number games which can be played around it, and to get the desired outcome in the preparation of financial statements. Findings Creative accounting, though legal and acceptable around the world, gives in the way to loopholes provided by the acts and rules governing the preparation of financial statements and eventually leading to financial crimes and hampering the economy as a whole. Research limitations/implications The limitations of this study remain to the fact that it is an empirical study, as a lot of papers and articles were studied before giving it a shape and reaching a conclusion. Practical implications Creative accounting though not illegal but the excess use of the same has given daunting effects on the financial statements and as a result have resulted into financial frauds and looting of peoples money throughout the world. Social implications Hard-earned money of the investors is looted and no action can be taken against as the mechanism and the legal bodies are still struggling to curb the problem, and thus it is very important to learn about creative accounting. Originality/value This study leads to the understanding of the growth of creative accounting and how it has resulted in accounting frauds leading to financial crimes in an economy.

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“…A number of accounting scandals speak in favor of the claim that the management was oft en involved in the manipulation of fi nancial statements to refl ect the poorer business results, due to tax evasions. Th e other goal is to show a better result than achieved in order to attain bonuses, or the assets overvaluation, which could result in unjustifi ed loan granting by fi nancial institutions [6].…”

Section: The Positive and Negative Creative Accounting Conceptsmentioning

confidence: 99%