Why The Creative Accounting Is Important Factors Essay

Financial reports are one of the most important factors on evaluating whether an organisation has met its objectives and goals, and also has satisfied its directors, lenders, and other stakeholders. Although the relevant accounting and financial standards, regulations, and frameworks are established for the fair and reliable presentation of financial reports, there are still fraud issues from manipulating financial information. Due to the recent global economic crisis, corporates tend to use creative accounting to maximise their profit and financial performance, and it seems to result in some serious financial frauds. A lot of questions come up with this creative accounting technique as well as the relation to corporate governance and frauds. It obviously has some negative results from inappropriate use of creative accounting but, on the other hand, it could be useful to present a company’s interests better within laws and regulations. This essay will elaborate what the creati ve accounting is, why companies use this accounting method, both positive and negative views of using creative accounting with appropriate examples and cases, and possible recommendations to improve the accounting standards and systems. Firstly the definition of creative accounting and how corporate governance and fraud are connected to creative accounting should be discussed. Creative accounting defines that a company uses the accounting knowledge to distort the financial figures but by followingShow MoreRelatedReview of Shah, A. K., (1998) Exploring the influences and constraints on creative accounting in the United Kingdom, European Accounting Review, 7 (1): 83-104.1033 Words   |  5 PagesIn recent years, the practice of creative accounting by the management of large listed corporation in the UK has received increasingly more attention and allegations, especially from key financial information users. 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