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Creative Accounting and Financial Reporting: Model Development and Empirical Testing

Author

Listed:
  • Fizza Tassadaq

    (Department of Business & Economics, FURC, Pakistan.)

  • Qaisar Ali Malik

    (Department of Business & Economics, FURC, Pakistan.)

Abstract

This paper empirically and critically investigates the issue of creative accounting in financial reporting. It not only analyzes the ethical responsibility of creative accounting but also focuses on other factors which influence the financial reporting like role of auditors, role of government regulations or international standards, impact of manipulative behaviors and impact of ethical values of an individual. Data has been collected through structured questionnaire from industrial sector. Descriptive and inferential statistics were used to generalize the results and conclude the findings. The study concluded that a company is involved in frauds or scandals because of several factors like unethical behaviors, agency problem and non professional attitude. Creative accounting is neither an illegal nor legal only the maximum use of it pushes a company in scandals. Creative accounting plays significant role in financial reporting but has been negatively correlated that means more managers involved in it may decrease the value of financial information. Government regulation/international standards have positive and significant role if it is flexible in financial reporting. As auditor's comment also plays positive and significant role in financial reporting. Ethics plays an important and positive role in financial reporting. The more ethical values mean lesser manipulative behaviors. So the manipulative behaviors only destroy the image of any company.

Suggested Citation

  • Fizza Tassadaq & Qaisar Ali Malik, 2015. "Creative Accounting and Financial Reporting: Model Development and Empirical Testing," International Journal of Economics and Financial Issues, Econjournals, vol. 5(2), pages 544-551.
    • Handle: RePEc:eco:journ1:2015-02-27
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    References listed on IDEAS

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    4. Berinde Sorin & Rachisan Paula Ramona & Grosanu Adrian, 2012. "Qualitative Study Regarding The Relationship Between Corporate Governance And Creative Accounting," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 642-647, December.
    5. Gary K. Meek & Ramesh P. Rao & Christopher J. Skousen, 2007. "Evidence on factors affecting the relationship between CEO stock option compensation and earnings management," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 6(3), pages 304-323, August.
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    Citations

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    Cited by:

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    2. Ndiimafhi Norah Netshisaulu & Huibrecht Margaretha Van der Poll & John Andrew Van der Poll, 2022. "A Conceptual Framework to Analyse Illicit Financial Flows (IFFs)," Risks, MDPI, vol. 10(9), pages 1-20, September.
    3. Roman Blazek & Pavol Durana & Katarina Valaskova, 2020. "Creative Accounting as an Apparatus for Reporting Profits in Agribusiness," JRFM, MDPI, vol. 13(11), pages 1-19, October.
    4. Juhendra Debbarma & Chinmoy Roy, 2023. "Effects of Corporate Governance on Creative Accounting Practices: Evidence from NSE-listed Companies in India," Indian Journal of Corporate Governance, , vol. 16(1), pages 52-78, June.
    5. Ibtihal A. Abed & Nazimah Hussin & Mostafa A. Ali & Hossam Haddad & Maha Shehadeh & Elina F. Hasan, 2022. "Creative Accounting Determinants and Financial Reporting Quality: Systematic Literature Review," Risks, MDPI, vol. 10(4), pages 1-25, April.
    6. Mariana Peprníčková & Lucie Jandová, 2017. "The Level of Creative Accounting in the Practice of Czech Accounting Entities [Míra kreativního účetnictví v praxi českých účetních jednotek]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2017(4), pages 57-86.
    7. Ikechukwu Okoye & Nwoye John Ugochukwu & Abiahu Mary-Fidelis Chidoziem, 2018. "Forestalling Ingenious Approach to Financial Reporting in Post IFRS Regime in Dangote Cement Company Nigeria PLC," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(2), pages 259-271, April.

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    More about this item

    Keywords

    Creative Accounting; Ethical Values; Role of Auditors; Government Regulations/International Standards; Manipulative Behaviors; Corporate Governance;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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