Creative Accounting and Accounting Fraud – Differences and Similarities
Creative Accounting and Accounting Fraud – Differences and Similarities

Author(s): Ivan Gudev
Subject(s): Economy, Business Economy / Management, Accounting - Business Administration
Published by: Университет за национално и световно стопанство (УНСС)
Keywords: accounts manipulation; creative accounting; accounting fraud
Summary/Abstract: In today’s global, dynamic, and turbulent business environment, the most prominent imperative for companies is to present their financial figures to look good in the eyes of the wide public. This is the reason that increasing number of managers indulge in accounting manipulation. However, accounting manipulation consists of two major types – creative accounting (which operates within the regulatory framework but outside the ethical standards) and accounting fraud which means manipulation stretching out of the regulatory framework and in most cases involves illegal activities. The borderline between these two terms is very tight and it is difficult even for the auditors to detect such practices if they are masterfully concealed. The main purpose of this paper is to define both terms, clarify where is the borderline between them and explore the major differences and similarities. The most prominent accounting scandals in the last century were caused by accounting fraud and this led to catastrophic consequences not only to the companies involved but also to whole sectors and economies. That’s why it is vital to explore the topic of those two phenomena, provide solutions to overcome them and recommendations for subsequent research to find ways to reduce such practices in the future.

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