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Topic: creative accounting a)Existing case b)What the next action to prevent?

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Accounting

Topic: creative accounting
a)Existing case
b)What the next action to prevent?

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Q1 Creative accounting Answer aExisting case Creative accounting consists of accounting practices that follow required laws and regulations but deviate from what those standards intend to accomplish Creative accounting capitalizes on loopholes in the accounting standards to falsely portray a better image of the company Although creative accounting practices are legal the loopholes they exploit are often reformed to prevent such behaviors How Creative Accounting Works A primary benefit of public accounting statements is that they allow investors to compare the financial health of competing companies However when firms indulge in creative accounting they often distort the value of the information that their financials provide Creative accountants will always find bizarre and novel ways to tweak figures to a companys advantage Their goal is to make a firm look as successful and profitable as possible and sometimes they will go about doing this by twisting the truth If a gray area in accounting is found it may be exploited even if it results in misleading investors Getting caught can ruin a companys reputation overnight However See Answer

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