International Journal of Academic Research in Business and Social Sciences

search-icon

Exploring the Nexus of Creative Accounting on the Reliability and Objectivity of Financial Reporting: A Concept Paper

Open access

Mohamad Shahril Isahak, Balqis Batrisyia Mohd Saidi, Mohamad Aiman Hafiz Abdul Hadi, Nur Aliya Sofia Mohd Hanif, Nurin Fatini Azmi, Eni Wuryani

Pages 1055-1062 Received: 19 Aug, 2023 Revised: 21 Sep, 2023 Published Online: 25 Oct, 2023

http://dx.doi.org/10.46886/IJARBSS/v13-i10/8164
Creative accounting involves the strategic manipulation of financial statement data by accounting experts. While financial statements are expected to represent a company's performance faithfully, creative accounting has become integral to financial reporting. However, its association with the extent of managerial involvement raises concerns about the accuracy of financial data. This conceptual study aims to dissect the driving components behind adopting creative accounting practices and their profound influence on the credibility of financial reporting. The investigation encompasses critical areas, including corporate governance, agency conflicts, ethical considerations, and a company's future orientation. The findings illuminate that the utilisation of inventive accounting methods by management significantly and unfavourably tarnishes the reliability of financial reporting. Notably, statutory auditors emerge as pivotal figures capable of nurturing creative accounting practices that, when guided ethically, can positively enhance the precision of financial reporting.

Adediran, S. A., Alade, S. O., & Oshode, A. A. (2013). Reliability of Financial Reporting and Companies Attribute: The Nigerian Experience. Research Journal of Finance and Accounting, 4(16), 108-114.
Akpanuko, E. E., & Umoren, N. J. (2018). The Influence of Creative Accounting on the Credibility of Accounting Reports. Journal of Financial Reporting and Accounting, 16(2), 292-310.
Aletaiwi, I. M. (2022). The Impact of Creative Accounting Practices on the Credibility of Financial Reports of Commercial Banks: The Moderating Role of Audit Committee. Journal of Positive School Psychology, 6(8), 5364-5383.
Ismael, A. Y. A. (2017). The Impact of Creative Accounting Techniques on the Reliability of Financial Reporting with Particular Reference to Saudi Auditors and Academics. International Journal of Economics and Financial Issues, 7(2), 283-291.
Jarah, B. A. F., Jarah, M. A. A., Al-Zaqeba, M. A. A., & Al-Jarrah, M. F. M. (2022). The Role of Internal Audit to Reduce the Effects of Creative Accounting on the Reliability of Financial Statements in the Jordanian Islamic Banks. International of Financial Studies, 10(60), 1-16.
Liberto, D. (2022, December 7). Creative Accounting: Definition, Types, and Examples. Investopedia. Retrieved December 30, 2022, from
https://www.investopedia.com/terms/c/creative-accounting.asp
Lukman, H., & Irisha, T. (2020). The Effect of Creative Accounting Practices with Statutory Auditor as Mediation, and Accountant Ethics Standards on the Reliability of Financial Statements. Advances in Social Science, Education and Humanities Research, 478(2), 1023-1029.
Mokhlis, C. I. (2019, September). The Impact of Creative Accounting on Financial Statements. The Middle East International Journal for Social Sciences (MEIJSS), 1(3), 95 - 99.
Shahid, M., & Ali, H. (2016, December 2). Influence of Creative Accounting on Reliability and Objectivity of Financial Reporting (Factors Responsible for Adoption of Creative Accounting Practices in Pakistan). Journal of Accounting and Finance in Emerging Economies, 2(2), 75–82.