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The ethics of creative accounting: Some Spanish evidence

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  • Oriol Amat

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  • John Blake
  • Ester Oliveras

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Abstract

'Creative accounting' involves accountants in making accounting policy choices or manipulating transactions in such a way as to give the impression in the accounts that they prefer. While regarded as unethical by most observers, a defence of creative accounting can be based on the ability of the users of accounts to identify bias in accounting policy choices and make appropriate adjustments. In this paper we take the example of the Barcelona Football Club where the club management made three key accounting policy choices that presented a favourable position, and a supporters' club presented an alternative report choosing three alternative accounting policies that presented an unfavourable position. We presented each of these financial reports to one of two groups of Spanish bank loan offices, with supporting notes making the impact of the accounting policy choices clear. We found that the more favourable set of accounts was significantly more likely to attract a positive response to a loan request. This result undermines the defence for creative accounting, based on the ability of users to identify manipulation.

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File URL: http://www.econ.upf.edu/docs/papers/downloads/455.pdf
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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 455.

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Date of creation: Mar 2000
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Handle: RePEc:upf:upfgen:455

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Creative accounting; ethics; Spain;

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  1. Oriol Amat & John Blake & Jack Dowds, 1998. "The ethics of creative accounting," Economics Working Papers 349, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Merchant, Kenneth A. & Rockness, Joanne, 1994. "The ethics of managing earnings: An empirical investigation," Journal of Accounting and Public Policy, Elsevier, vol. 13(1), pages 79-94.
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Cited by:
  1. Eenkhoorn, P. & Graafland, J.J., 2010. "Lying in Business: Insights from Hannah Arendt’s ‘Lying in Politics’," Discussion Paper 2010-75, Tilburg University, Center for Economic Research.
  2. Graafland, J.J. & Smid, H., 2004. "Reputation, corporate social responsibility and market regulation," MPRA Paper 20772, University Library of Munich, Germany.
  3. Ester Oliveras & Oriol Amat, 2003. "Ethics and creative accounting: Some empirical evidence on accounting for intangibles in Spain," Economics Working Papers 732, Department of Economics and Business, Universitat Pompeu Fabra.

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