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The ethics of creative accounting: Some Spanish evidence

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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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  • Oriol Amat & John Blake & Ester Oliveras, 2000. "The ethics of creative accounting: Some Spanish evidence," Economics Working Papers 455, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:455
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    1. Keith Robson, 1994. "The discourse of inflation accounting," European Accounting Review, Taylor & Francis Journals, vol. 3(2), pages 195-214.
    2. Oriol Amat & John Blake & Jack Dowds, 1998. "The ethics of creative accounting," Economics Working Papers 349, Department of Economics and Business, Universitat Pompeu Fabra.
    3. 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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    1. Csongor CSŐSZ & Partenie DUMBRAVA & Albert MÁRTON, 2012. "Creative accounting – tangible assets and amortization," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 767-774, May.
    2. J.J. Graafland & H. Smid, 2004. "Reputation, Corporate Social Responsibility and Market Regulation," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business (FEB), Review of Business and Economic Literature, vol. 0(2), pages 271-308.
    3. Eenkhoorn, P. & Graafland, J.J., 2010. "Lying in Business : Insights from Hannah Arendt’s ‘Lying in Politics’," Other publications TiSEM 3227207d-c563-4afd-ae08-f, Tilburg University, School of Economics and Management.
    4. 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.
    5. Bo Kyeong Lee & So Young Sohn, 2017. "A Credit Scoring Model for SMEs Based on Accounting Ethics," Sustainability, MDPI, vol. 9(9), pages 1-15, September.
    6. Carmen Vâlcu & Roxana Aurelia Mârț & Cristina Moroi, 2019. "The Determining Factors of Creative Accounting," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(2), pages 927-933, December.

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    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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