Techniques, objectives and motivations of creative accounting: evidence from the Czech Republic

Abstract

This research intended to identify the techniques and objectives and motivations of creative accounting in the Czech Republic and confirm the responses similarity between two groups of respondents. The views of 318 financial professionals were analyzed through a questionnaire. The statistical Friedman test was used for testing two hypotheses: (H1) There is no difference in the presented results in the techniques of creative accounting between groups of financial professionals (ACPA, CFO, Lender, CPA, and MBA); (H2) There is no difference in the presented results in the objectives and motivations behind creative accounting between groups of financial professionals. This paper shows that the most used techniques are holding open books to record additional sales, delaying shipments, recognizing revenue on partial shipments, and changing inventory values. Common objectives and motivations included reducing earnings volatility, supporting stock prices, increasing income or cash flow, and creating a consensus earnings forecast of analytics. Both hypotheses H1 and H2 were confirmed. The presented article is based on our own research. Using the information obtained, it will be possible for auditors and other authorities to focus on specific areas of creative accounting and its motivations.

Keywords

• creative accounting
• fraud
• earnings management
• earnings volatility
• gain