Creative accounting
The manipulation of *financial statements through the use of imaginative or unusual accounting techniques. Creative accounting techniques include, among other things, the following: (i) extension of the *amortization periods of *long-term assets to reduce amortization expenses in the initial years of an asset’s life; (ii) manipulation of *reserves through * cookie jar accounting; (iii) the use of *off-balance sheet items; and (iv) *window dressing techniques. Creative accounting techniques may or may not contravene *Generally Accepted Accounting Principles (GAAP), as creative accountants tend to dance around the outer boundaries of GAAP. However, by "operating in the gray area between legitimacy and outright fraud" (Beattie et al., 2001, 5), creative accountants are generally viewed as motivated by attempts to mislead investors and others. In recent years, systems of GAAP and Generally Accepted Auditing Standards (GAAS) around the world have aimed to narrow the scope for auditor acquiescence to creative accounting transactions. As has been memorably stated, creative accountants have tended to become more bold in pushing the boundaries of accounting acceptability: "Auditors giving the green light to risky transactions was the accounting equivalent of providing Viagra to a sex addict; it fuelled the desire to push harder" (Toffler and Reingold, 2003, 245). Further reading: McBarnet and Whelan (1999); Schilit (2002); Smith, T. (1996)

Auditor's dictionary. 2014.

Look at other dictionaries:

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  • creative accounting — or creative accountancy see ↑creative above. • • • Main Entry: ↑create * * * creative accounting UK US noun [uncountable] business the practice of showing financial information in a way that gives a false idea but is not illegal Th …   Useful english dictionary

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  • creative accounting — Misleadingly optimistic, though not illegal, forms of accounting. This can occur because there are a number of accounting transactions that are not subject to regulations or the regulations are ambiguous. Companies sometimes make use of these… …   Accounting dictionary

  • creative accounting — Misleadingly optimistic, though not illegal, forms of accounting. This can occur because there are a number of accounting transactions that are not subject to regulations or the regulations are ambiguous. Companies sometimes make use of these… …   Big dictionary of business and management

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  • creative accounting —    This term refers to the presentation of a company s results in a way that, although generally legal, glosses over the problems and makes the results appear better than they are.     It was suggested that some creative accounting might help to… …   English Idioms & idiomatic expressions

  • creative accounting — /kriˌeɪtɪv əˈkaʊntɪŋ/ (say kree.aytiv uh kownting) noun the structuring or adapting of accounts to meet a desired outcome, to an extent that is misleading but not illegal: *The … government did itself no favours by exaggerating early spending… …   Australian English dictionary

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