Creative accounting a tool for
ﬁnancial crime: a review of the
techniques and its eﬀects
Chander Mohan Gupta and Devesh Kumar
Faculty of Management Sciences and Liberal Arts,
Shoolini University, Solan, India
Purpose –The purpose of this paperis to study the concept and procedure of creative accounting as how is
it worked aroundand how it can lead to ﬁnancial crimes. The procedure which are followedand which are the
people who are involved and who are the victims of such crimes.The methods which are used to perform the
action and how is it done. What are the ﬁndings of differentresearchers who have studied the same concept
and how can it be curbed is the main purposeof the paper.
Design/methodology/approach –This paper is designedto ﬁnd out the working of accounting policies
and how the loopholes in the same can actually be taken into account,resulting in a certain number games
which can be playedaround it, and to get the desired outcome in the preparation of ﬁnancial statements.
Findings –Creative accounting, though legal and acceptable around the world, gives in the way to
loopholes provided by the acts and rules governing the preparation of ﬁnancial statements and eventually
leading to ﬁnancialcrimes and hampering the economy as a whole.
Research limitations/implications –The limitations of this study remain to the fact that it is an
empiricalstudy, as a lot of papers and articles were studied before giving it a shape and reaching a conclusion.
Practical implications –Creative accountingthough not illegal but the excess use of the same has given
daunting effects on the ﬁnancial statementsand as a result have resulted into ﬁnancial fraudsand looting of
peoples moneythroughout the world.
Social implications –Hard-earned moneyof the investors is looted and no action can be taken against as
the mechanism and the legal bodies are still strugglingto curb the problem, and thus it is very important to
learn aboutcreative accounting.
Originality/value –This study leadsto the understanding of the growth of creative accountingand how it
has resultedin accounting frauds leading to ﬁnancialcrimes in an economy.
Keywords Financial crimes, Financial frauds, Creative accounting, Users, Financial statements
Paper type Literature review
Financial statements (FSs) publishedperiodically by the ﬁrms are the source of information
to every user of the statements who actually use the same to take decisions based on the
information provided by these statements. The information provided by the companies
usually goads investors to invest in the companies with a view of wealth and proﬁt
maximization. The companies have sometimes used these FSs to provide misleading/
manipulated information to actually portray a greener picture in the eyes of the users to
beneﬁt from the same. We in the past and today still are actually facing problemsbecause of
manipulated FSs. Frauds likeEnron, World Com, Sahara Group, P.N.B. and many more are
coming up where the manipulatedFSs have given a new dimension to ﬁnancial crimes and
created a turmoil in the business world. Every decisionthat the investors and other users of
the FS take is based on the information provided to them. The curiosity of the users of the
Journalof Financial Crime
Vol.27 No. 2, 2020
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