Creative Accounting: A Literature Review

Abstract

Abstract Creative accounting has come to the attention of researchers and continues to remain a hot topic due to major financial scandals where companies have used creative accounting techniques for various reasons. Creative accounting is often seen as a manipulation of figures to show what management, the preparers of financial statements want them to show. This paper is a traditional review of the literature dealing with the concept of creative accounting. In it I highlight what the definitions of creative accounting are, the views on creative accounting, the motivation for using creative accounting and the topics discussed on creative accounting in the literature. The research is conducted on a sample of 14 articles selected from the EbscoHost and ProQuest databases. In the articles included in the sample, creative accounting is generally viewed from a negative perspective, as a manipulation of financial statements, aiming to mislead the users of these reports. Reasons why companies choose to use creative accounting practices include: keeping company results within the limits set by shareholders, raising additional capital at a favorable price, meeting listing requirements, lower taxation, deferring insolvency, smoothing earnings to show a better image to investors, hiding poor management. This research aims to be a literature review showing what the view of creative accounting has been in recent years, with most of the articles reviewed from the period 2010-2022.