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

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.