Revision question on creative accounting ( NBAA May 2016)

Creative  accounting involves presenting income, expenses, assets or liability with the intent to influence readers towards the interpretations desired by the authors. It becomes the financial number game and is systematic misrepresentation of net income or net assets.  this is achieved through the aggressive choice and application of accounting principles, fraudulent financial reporting , earning management or income smoothing
the facts may be twisted or the freedom given in accounting standards may be misused. ultimately, the financial statement do not reflect a true and fair view that the author desires. this involves ‘creativity’ on part of the accountant and hence it is called ‘creative accounting’

  • Describe the methods used in creative accounting and the ways to curb creative accounting
  • analyse four objectives management tries to achieve through creative accounting
  • explain the extent trough which creative accounting can be practised in line with IFRSs

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