Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

these papers according to the

most frequent debating themes.
In the end of our research,
A BRIEF
we have formulated our own
REVIEW OF conclusion,, that there is no
unanimously or unifying accepted
CREATIVE theory at the international or
ACCOUNTIN European level regarding what is,
what the creative accounting
G
represents or which are its basic
LITERATUR principles.

E AND ITS

Key words: creative accounting,

CONS
financial scandals, financial
EQUE
reporting
NCES
JEL codes: M41, M14, G34
IN
PRAC
TICE Introduction

When and why exactly

this concept first appeared and
Diana
Balaciu its development
what influenced
these are questions that come up
Victoria
Bogdanthis true Pandoras
when Beattrice
opening
Alina
Box: creative accounting.
Vladu
With hindsight a few
favourable circumstances to this
can
be
identified,
ABSTRACT: Our concept
circumstances
first
related
to the
research has as
main objective a economical advent of world states
short review of but at the same time to the need of
the
aspects economic entities to create for
approached at the themselves a good reputation in an
European level increasingly competitive and tough
regarding the role economic environment. About this
that
creative particular moment, that is - the first
accounting plays mention,
regarding
creative
in the life of an accounting practices, we cant
enterprise.
In ignore the fact that the first
order to achieve mention belongs to the founder of
our goal, we have accounting - Luca Paciolo. This
analysed
ambition of making figures more
approximately 40 appealing or the opposite, if the
academic articles case, is as old as 500 years. Thus,
indexed
in Luca Paciolo was shaping in his
international
database, such as already renowned De Arithmetica,
Science Direct, the first accounting manual,
Emerald
and practices of creative accounting.
ProQuest.
We
In the context of brisk
foreign
trade,
have
used
a Venetian
relationships between traders
longitudinal
classification of were recorded by double-entry
the
selected bookkeeping with ink and quillarticles, studied pen in main and subsidiary books.
between the years Where discrepancies arose, the
1999 and 2009; inkwell was occasionally knocked
we have tried, over on these books not always
also,
a unintentionally in order to make
classification of the entries illegible. Thats the

origin of the termare actually trials for entreprises;

cover-up.
affecting their cash flow and
In
thegenerating risks, that accounting
context of thedoesnt deal with in a flawless
world economicmanner. Therefore, managers are
crisis nowadays,tempted to resort to ingenious,
more
often
questionable
creative
procedures,
for
refining
accounts
accounting will
presentation.
be referred to
more often as a
The reality of an enterprise
field from wherecan be mirrored in several aspects,
it is expectedstarting from the atmosphere and
either to offerthe environment where the
employees perform their daily
live-saving
activity, through the companys
solutions or be
blamed for all the1 University of Oradea, Romania,
negative
dbalaciu@uoradea.ro
evolutions.
On2 University of Oradea, Romania,
this
aspect,vbogdan@uoradea.ro
Salustro
and3 Babes Bolyai University, Cluj Napoca,
Leburn
(2000)Romania,
beattrice.vladu@econ.ubbcluj.ro
would
say:
Crisis
periods
170

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

creating an image, a reality

appropriated with subjective prints.
This approach of the
brand and to theaccounting informing system may
yearly financialseem absurd due to the fact that
statements. Thisthe information of the financial
reality,
though,statements are some figures, some
seen from thevalues which apparently cannot
perspective of thebe misunderstood. Yet, reading
external
between the lines and making
environment,
certain connections, several ways
capitalized
into manipulate the information can
clients, suppliers,
be discovered.
public
The purpose of our article
institutions,
banks, investorsis to present the current stage of
etc, is stronglyknowledge in the field of the
influenced by thecreative accounting. In this view,
subjectivity of thewe have used, first of all, the
one watching.
presentation of a frame for the
We
willunderstanding of the creative
further tackle theaccounting practices, to the
information fromidentification of the protagonists,
the
financialof the conditions favouring these
statements,
practices and not in the least of
analyzing
themthe objectives set. In the second
from
theplace, we have reviewed, based
perspective of theon the specific literature, the main
communication foreign and domestic approaches
process betweenregarding the concept of creative
the two pores. Theaccounting, trying to identify and
present the main collocations
enterprise,
considered as aused in literature to describe this
phenomenon. In the third place,
transmitter,
through
theour scientific approach reviewed
channel of thethe academic articles dealing with
this subject in the last 10 years,
financial
statements sendsavailable in scientific databases
the
messageEmerald, Science Direct and
capitalized in theProQuest. The paper provides, in
the end, some conclusions and
financial
suggestions for future research.
information to a
receiver which is
The
theoretical
actually the user of
proposed for the
this information.framework
understanding
of
creative
Until this messageaccounting practices
gets from the
Authors like Stolowy and
information
Breton (2003) are among the few
supplier to theinterested in the subject of
receiver,
it
iscreative accounting daring to
influenced
bysuggest a theoretical framework
perturbing factorsfor the understanding of the
and, once reachingaccounting
manipulation
the receiver, it willpractices.
The
fundamental
be processed andprinciple which their theoretical
understood
framework is based on is the
depending on thisfollowing: the aim of publishing
ones
interests,financial information is that to
experience, statereduce the costs of the enterprise
and
perception,projects financing. But this

reduction dependssubtracting certain profits or

on the risks toexpenses (which represents the
transfer the richeschange of the net result) or
as
they
aretransferring a column from the
perceived by theupstream or the downstream of
agents on thethe results serving as a
market.
Thecomputation base of the result per
practical means toshare (which is the management
operate
thesethrough classification). Regarding
transfers
arethe relation between liabilities
based on theand assets, this can be modified
results and theby increasing the benefit or hiding
balance betweencertain financings with the help of
the debts andengagements generating devices,
share
capital.off the balance sheet. Figure 1
Consequently, therepresents
the
theoretical
purpose
offramework proposed by Stolowy
accounting dataand Breton for the understanding
management is toof
the
accounting
data
change these twomanagement.
measures:
the
variation of the
result per share
and the relation
liabilities/assets.
The result per
share can be
changed in two
ways:
either
171
adding
or

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

ACCOUNT
S
MANIPULAT
ION
Potential wealth transfer

Within the limits

of laws
and
Outside the limits of laws
standard
and standards
s

Fraud
S
t
D
e

Main
research
streams

Name of the
research stream

Earnings
r
managemen

A
Level of
E
P
S

Main
objective
De

empirical
researches
Type of
research

Schipper
(1989)
(1991)

Representative authors

DeAngelo
(1994)

Few real
empirical
researches

Tweedie et
Whittington
(1990)
Naser (1993)
Breton et
Taffler
(1995)
Pierce-Brown
et Steele

No
empirical
research.
Professional
opinion
Griffiths
(1986, 1995)
Smith (1992)
Schilit (1992)
Stolowy
(2000)

Interpretations

172

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

pieces out of the game. How

can we avoid such situations?
Simple, taking into account the
Figu piece
improving
principle
re 1.
(according
to
the
Russians,
first
A
worded
out
by
Makogonov)
who
prop
osed shows that: in balanced position,
fram when none of the parts has
ewor immediate threats, it is necessary
k for to rearrange the pieces, in the
unde worst situation, on a suitable
rstan
field, or if this thing is not
ding
acco possible, lets try to change
untinthem. Of course, there are
multiple the situations when we
g
mani have more pieces out of the game.
pulat It is necessary the successive
ion application of this principle,
pract
starting with the strongest pieces.
ices
What we have presented above
Source: H. Stolowy, G. Breton, Accounts Manipulation: A
seems
something
absolutely
Literature
Review and
ordinary, we all learn, from first
Proposed
steps on the land of this magical
Conceptual
Framework,
game, that we have to arrange
13.01.2003, pg
the pieces on the centre of the
35
board, to be stronger. This does
not prevent us, that in the
moments of relative calm on
Actors,
the board, from forgetting about
favouring
conditions and the application of this principle.
Otherwise, subsequently, this
objectives
thing becomes already hard or
In
theimpossible to achieve.
chess parties there
As within the framework
are many timesof this brain game we can see
when we considerthe ability of the parts to use the
that one of thepieces available to them (by
parts
has
ancomplying more or less with the
important
principle worded) in order to
advantage, evenachieve the result proposed, thus,
though
theby extrapolating our analysis to
number of thethe case of the enterprises, we can
pieces on theidentify certain participants who,
board is the same.according to the levers available
To what does thisto them can shape, more or less,
statement
owe,the image of the enterprise.
otherwise
a
Therefore, in the life of an
correct
one?enterprise, two categories of
Obviously, it isactors have a special position
(Feleag N., 2006):
explained through
(1)
on one side, the
the pieces activity
shareholders, because
difference.
their patrimonial rights
Seldom, during
are not exercised but
the moments of
in the end, after the
maximum
others,
who
have
confrontation of
rights
(creditors,
the pieces on the
suppliers, employees
board, one of the
etc.) have emphasised
parts has more
their
debts,
the

(2)

d to take advantage by
shareh
allowing
themselves
olders
take
considerable
the
advantages
or,
financi
generally, by directing
al risk
the entity towards a
justifyi
direction useful for
ng the
them. In the case of
approp
enterprises quoted on
riation
financial markets there
of
a
is a natural distribution
part of
of responsibilities. Such
the
a distribution and the
years
problems arising from
profit
it have been presented
and
in the founding papers
from
of Berle and Means
the
(1932).
residua
The shareholders invest
l net
their
capitals and give the
asset,
leaders/managers
a mandate
in the
through
which
they
manage the
case of
best the organization, trying to
the
entity maximize the performance of the
closing enterprise. This separation of the
down; responsibility can lead to conflicts
on thegenerating costs. Manipulating
other accounting data is an activity
side, reserved to company managers,
even though the other players in
the
leaders the field influence the leaders/
managers in their decision to
,
becaus perform such a manipulation. If it
e theywere possible to build a theory of
have the accounting data management,
privile it would not have started from the
techniques used for manipulation,
ged
inform but based on the needs, the
ation, occasions arising and of the
taking relations between players and
investors.
into
The investors can be
accoun
t
thedivided in four subgroups: real and
positio potential shareholders and the real
n heldand potential stockholders. Their
in theinterests are very varied and the
enterpr transfers of riches can be operated
these
subgroups.
ise and,between
Consequently,
they
react
differently
therefo
to
manipulating
accounting
data.
re, are
173
tempte

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

literature in the 1970s, most often

in the papers about the
bankruptcy of enterprises and
Relating those written by Watts and
ourselves to theZimmerman (1978, 1986, 1990)
analogy with thewhich represent the foundation of
exciting
gamethe positive accounting theory.
mentioned above,This research trend made the
we wonder toobject of several empirical works
what extent wetrying to explain the accounting
can
identifychoices starting from the problem
certain positiveof the political costs that the
values of theenterprises are exposed to. More
creative
accounting whichrecently, Brown and Steele (1999)
is
mentionedhave selected a portfolio of 12
quite timidly inaccounting techniques, combining
the
specificalso the accounting options with
the management decisions. In
accounting
addition to the political costs, it is
literature.
Therefore, beingemphasised the importance of the
attracted to thisactivity and risk sector and that of
idea, to the extentthe firm operation, as significant
to which we candeterminants of the creative
identify
suchaccounting.
aspects, we will
According to Colasse,
return
creative accounting is defined as a
cumulus
of
accounting
Literature
information practices, at the limit
review
of legitimacy, practised by some
The
economic entities in order to
concept
ofbeautify the image of the financial
creative
position and the economicaccounting
isfinancial performances. Also,
usually used toColasse states the fact that these
describe
thepractices arise as a result of the
process through
which
thenormalization limits but also as a
result of the fact that the human
accounting
professionals usecreativity does not have limits.
their knowledgeWe retain the following remark:
in
order
toit would be wrong to believe that
manipulate
thethe regularization and the
figures includednormalization present objectively
in the annualthe accounting portrait of the
accounts.
enterprise. They reveal, explicitly,
Accounting has beenonly the manner in which this
defined as the art ofportrait has been painted. On the
faking a balance
sheet (Bertolus J.),other side though, they leave to
account
preparers
a
the
art
ofthe
calculating
themanipulation line, in the same
benefits
(Lignontime
indispensable
and
M.), the art ofirreducible, that they can use
presenting a balance
sheet (Gounin L.),according to the considerations
or the art of savingderiving from the enterprises
money (Ledoublefinancial
policy
or
the
D.).
communication policy. (Colasse,
The
quoted by Raybaud Turillo and
creative
Teller, 1996).
accounting
Almost in the same manner,
appeared in theTrotman (1993) defines creative
Anglo-Saxon

accounting,
felt each time the profits have a
fluctuation,
unjustified
appreciating that ithigh
is
athrough the economic reality.
communication
A complex vision is
technique havingprovided by Naser (1993) in
in
view
thewhose
opinion,
creative
amelioration of theaccounting is: 1) the process
information
through which, due to the
provided to theexistence of some breaches in the
investors.
Thus,rules, accounting figures are
the
economicmanipulated
and,
taking
entity is presentingadvantage of the flexibility, they
to the investors orchoose
those
measurement
to the prospectivepractices
allowing
the
investors financialtransformation of the synthesis
statements passeddocuments from what they are
through the filtersupposed to be into what the
of
somemanagers want; 2) the process
techniques capablethrough which the transactions
of generating aare structured in such a manner
more favourablethat it allows the production of
image
on
thethe desired accounting result.
market but also the
Some
authors
define
illusion of somecreative
accounting
as
an
more
attractiveassembly of procedures having in
results that theview the change of the level of the
normal.
result in order to increase or
Defining decrease, or present the financial
statements,
without
these
creative
accounting
objectives
being
reciprocally
through a wellexcluded (Stolowy, 2000). For
known
practice,others, creative accounting is
that is the resultrepresented by the assembly of
of
techniques, operations and freedom
smoothing(smooth spaces provided by the accounting
ing
income),texts which, without distancing
Barnea, Ronen andfrom the accounting norm and
Sadan
(1976)strictness, allow
appreciate that this
makes its presence

174

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

practices do not break the law or

the
accounting
standards,
therefore they comply with the
the managers oflaw but not its spirit. Jameson
an enterprise thestates thus the negative character
change of theof creative accounting which
value of the resultdistorts the enterprises financial
or the change of
and
the
position,
the aspect of theresults
misleading
the
users
of the
accounting
accounting information.
documents
(Gillet, quoted by
From the perspective of a
Shabou
and
financial
analyst, Smith (1992)
Boulila Taktak,
considers that the highest part of
2002).
As
athe economic growth of the 80s
is due to creative accounting,
journalist,
Griffiths (1986)that is to the accountants skills
noticed that thethan rather to a real economic
majority of thegrowth. In the book, Accounting
economic entitiesfor Growth, he motivates the
hide
theirprevious idea, exemplifying the
benefits.
Hecases of some British companies
appreciates thatwhich use creative accounting
the
financialpractices (finding concrete proofs
statements
areat 45 economic entities of great
drawn up basedBritain), taking the example of
on
thethree
companies
which
embellished
experienced
the
financial
collapse
registers,
the
resulted figuresshortly after they had presented
being changed intheir financial statements which
reflected:
financial
order to protectclearly
the
guilty.stability.
Creative
Defining
creative
accounting
isaccounting,
Merchant
and
presented as aRockness (1994) appreciate that
legitimate fraud. any action come from the
management which can distort the
From
profits and which is not a
practitioners
consequence of the economic
perspective,
Jameson (1988)reality, it actually represents the
of
the
financial
appreciates
theprivilege
engineering.
They
draw
the
fact
that
attention
on
the
fact
that
on
long
accounting
process in itsterm all these forced approaches
essence, requirescan have a negative effort on the
the operation withfinancial stability of the economic
entities.
different
Defining
creative
motivations,
accounting
through
its
practices,
different
ideas.
From
thisShah (1996) as well as MacBarnet
diversity
ariseand Whelan (1999) appreciate
that
all
those
financial
manipulation,
cheating
andengineering used in order to
falsification
atcreate the image desired, the
some
lessrepresentation desired are called
instruments
of
creative
scrupulous
accounting. One year later, Shah
accounting
members. It is heactually defines the concept of
who states thatcreative accounting and the
these
creativeemphasis is placed on the fact that
the management of the enterprise
accounting

uses
thetruthfulness of the accounting
information sent by the economic
legislations
breaches or theentity to the business environment
ambiguities
inis being altered.
order to create
Romanian literature is
their own portraitpoor in what the interest
of the enterprise,regarding creative accounting is
according to theirconcerned. Feleaga and Malciu
preferences,
in(2002) stated that creative
other words theaccounting was defined as a
process through which the
financial
performance
isaccounting professionals use their
obtained throughknowledge in order to manipulate
the use of thethe figures contained in the
breaches in theannual accounts.
Although
there
are
legislation. The
author emphasisesmisunderstandings regarding the
the idea thatdefinition of creative accounting,
the majority of researchers accept
creative
accounting doesthe idea that this stands out
not break the lawthrough two aspects. The first
but only its spirit. aspect has in view the use of the
professionals
Creative accounting
imagination
in
order
to translate
accounting is used,
those
juridical,
economic
and
according to the
financial
innovations
for
which
opinion issued by
are
no
normalized
Burlacu and Ptroithere
accounting
solutions
at
the time
(2005) and for the
of
their
occurrence.
The
second
consolidation of
the
economic-aspect shows the fact that the
financial indicatorsadjustments resulting from this
of the economicfinancial engineering are initiated
entities, distortingaccording to their incidence on
yet
theirthe enterprises balance sheet and
results.
informational
content.
It
is
appreciated that in
this
way
the
consistency
and
175

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

Italy
Japan

credits, earnings management

Politiche di bilancio
Furyo Kessan (improper accounting);
Funshoku (window-dressing), Kara-uri (dummy or e
oshi (bringing sales forward)
Fudging, Manipulative accounting, Feral accounting
Window-dressing, Accounting for profits, Bubbles, En

Other
nomenclature of
creative
Australia
accounting in
Great
literature
Britain
Creative
(Source: Audit Committee Newsltter, KPMG, June, 2003)
accounting,
as
mentioned before,
By the mentioned above
has
developed
we
pointed
out the fact that
geographically creative accounting
has known a
both
in
itsglobal geographical development,
practices
today being a world discussed
complexity and inphenomenon.
its nomenclature.
Research methodology
Thus, the term
preferred in the
The object of the current
USA and the mostarticle refers to the presentation of
frequent one isthe conceptual delimitations
that of earningsregarding creative accounting, the
management
detailed description of theoretical
whereas
inframework proposed by some
Europe we areauthors, as well as the brief
using the phrasereview of the literature written on
creative
the topic between 1999 and 2009.
accounting. InAlso, we can see how the specific
the
literature,
literature regarding the aspects
creative
concerning the magical land of
accounting
can
still be foundcreative accounting becomes day
under the name ofby day even richer, not little
guilty by this thing being the
income
financial scandals and the recent
smoothing,
economic
crisis
we
are
earnings
experiencing
(are
we
going
to
get
smoothing,
over it?) we have decided to
cosmetic
accounting
or shortly review the main aspects
approached at the European level
accounting
regarding the role that creative
cosmetics,
financial crafts or accounting is playing in this
accounting crafts.play. To achieve this aim, we
approximately
40
For
moreanalysed
academic
articles
available
in
explanations on
three
scientific
databases,
Science
all the various
Direct, Emerald and ProQuest.
global
nomenclature, weThe choice of these three sources
enclose
theis motivated by the presence
following table: hereof all the articles having in
view a very good quality
international research and the
Country
Switzerland English language to present them.
Our approach regarding the
Germany
exploratory research includes two
Holland
stages:
The first consists in
finding the information about
France
creative accounting in the
USA

databases
second stage consisted in
mentioned abovegrouping them on the most
the longitudinalfrequently approached themes.
classification ofOut of these, we mention aspects
the
selectedconnected to different accounting
articles thetechniques/practices
in
the
interval had incontext of some bankruptcies, by
mind
beingtheir influence on the financial
contained
markets transactions and aspects
between 1999 andconnected to the problems of
2009.
audit and corporative governance.
The

176

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

2. Acknowledgement
of
profits
3. Information regarding the
financial statements re

In
our
research, we have
Based on these three directions, the
used the deductive
method
(thearticle examines the GAAPs
attainment of therequirements and the ways through
conclusions basedwhich Enron used these GAAPs to
on the alreadyhide the economic substance
existing theories),representing the base of the
the
type
oftransactions. If the economic
research
usedprinciple on the judicial had been
being
theapplied in the case of Enron Co.,
fundamental one.
The utility of suchthe investors and creditors would
a
researchhave been provided with a realistic
contributes to theimage of the financial position and
ensurance of theresults, probably avoiding what
premises for thesubsequently has become the most
development
offamous bankruptcy case in the
future research. USA history. Remaining on the
sphere of serious accounting
Discussionscandals within the big companies
The main(for example, World Com and
interest
areasEnron) and in the banking sector
around which we(for example BCCI, Barings, Allied
have tried toIrish Bank and Baninter), Mine
embroider areOmurgonulsen,
Ugur
therefore
Omurgonulsen
(2009)
brings
into
presented in detail
next:
discussion the problem of creative
Bankrupt accounting with its legal and illegal
facets which occurred on the
cies
companies
and
governments
agenda. They examine a certain
The
spectacular risetype of creative accounting practice
and fall of Enron(fraud) in the light of a Turkish
Co. provides acase (the ImarBank scandal). It has
truthful
discovered
that
the
illustration of thebeen
deficiencies
within
the
legal
fact that some
companies
canbanking conceptual framework, the
use the juridicalinadvertencies of the regulating and
status
ofsupervision governmental bodies,
transactions
topractical difficulties in the
hide the economicapplication of the ethical rules and
substance
representing theof the legislation which have led to
base of thesethe wrong operation of the judicial
system, are significant reasons for
transactions.
Baker
andcreative accounting practice in
Hayes(2004)
connection with the Imarbank
examine
theowners and top managements
creative
greed. Also, the intention and
accounting
capacity of the political power in
practices
fighting against this type of
connected to:
corruption are crucial. The authors
1. Off
balance also deal with the different
techniques of creative accounting
sheet
financing found in practice, the review of a

series of illegalreduced by making the accounting

and the audit system more efficient
transactions
discovered
atbut also through an efficient
Imarbank and thecorporative governance.
reasons for which
Audit
the
public
Even though there are
authority
has
failed
innumerous articles in the specific
preventing
theaccounting literature regarding
Imarbank scandal. the theme of creative accounting,
tackling the creative accounting
Creative techniques such as window
accounting is thedressing and off balance sheet
root of numerousfinancing, there is little known
accounting
about the frequency with which
scandals.
Itthe
companies
use
these
represents
thetechniques. In this view, Naser &
transformation ofPendlebury (1992) tackle the
the
accountingresults of the application of a
figures from whatquestionnaire to the experienced
they
are
inauditors who have been asked to
accordance to the
express their opinion concerning
economic reality
creative accounting. The auditors
into what the
have been asked to indicate the
managers
want
frequency with which they met
using
the
creative accounting techniques
advantages of the
and their answers have been
existing
analysed according to: the type of
regulations and/or
companies,
the
industrial
ignoring some of
classification
and
creative
them. The impact
accounting practices.
of the creative or
fraudulent
177
accounting can be

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

empirical study proposed by

Caramanis and Lennox (2008)
investigates the impact of the
The
auditorsaudit mission efforts on the
managerial earnings using a
perception
regarding
theunique database which contains
reasons for whichthe hours worked by the auditors
the companies usemade within 9738 audit works in
creative
Greece in the companies audited
accounting
andbetween 1994-2002. It has been
the steps that
must be followednoticed that in the case of audit
in
order
toworks where the number of hours
eliminate creativeis small the audited companies
accounting
arehave the tendencies to manipulate
also analysed bymore the managerial earnings
the authors.
therefore the reduced effort for
the audit works increases the
The
possibility that the managers
accounting
standards
arereport manipulated profits.
created
and
A factor of the weak
implemented inconformity with the accounting
order
tostandards seems to be the low
standardise
thequality of the audit trials.
Falkman and Tagesson (2008)
accounting
practice,
theydescribe and explain the impact of
the legislation and standardization
containing
the municipal accounting in
definitions of theon
Sweden under the spectre of
accounting
positive theory of accounting. The
concepts whoseregularization of the municipal
function is toaccounting in Sweden represented
guide
thethe object of fundamental
researches in the last decades. The
professional
accounting
was
reasoning.
Themunicipal
regulated
by
law
starting
with
professional
st
reasoning has aJanuary 1 1998. The main
major impact onpurpose of the accounting reform
the creation of thein Sweden was that to suppress
the creative accounting and
financial
increase
the
level
of
statements
harmonization and comparability.
because
the
The data collected have
subjectivity and
been
obtained
through
the
the freedom of
documentary
study,
questionnaire
action can lead to
the manipulationand interviews. The final results
showed that the reform had a
of the profits.
limited impact on the accounting
Hronsky
ipractices and the conformity with
Houghton (2001)the accounting standards was made
identify
theat a low level. Also, the study
decisions madeshowed that there were major
by the auditorsperception differences among the
within
thefinancial statements preparers.
legislative
Governance
changes,
analysing
the
The great Britain example
accuracy of the
illustrates as well as possible the
professional
reasoning withinproblems which can be associated
the
legislativewith the property separation and
the enterprise control, dealing
changes.
with several aspects involved by
An

the
agencysaccounting profession launched in
theory.
SuchMay 1991 the idea of creating a
problems
committee
regarding
the
connected to thecorporative governance financial
agency, as it hasaspects (Feleag, 2008). After the
been
committee was created, there
demonstrated
were the scandals of the BCCI
above,
oftenand Maxwell enterprises. The
include
theCadbury report was drawn up
managers assetbetween May 1991 and the end of
abuse and the lack1992, through the committee with
of a real control.the same name, due to Sir Adrian
Yet, as in otherCadbury. The central report is
countries,
thebuilt by what the authors call a
development ofcode regarding the best practices.
the
corporativeThey pretend that, if such a code
governance
inhad existed in the past, the recent
Great Britain hasunexpected bankruptcy examples
initially led toand the fraud cases would have
enterprise
been disclosed much earlier.
collapses
and
Peasnell et all. (2000)
financial
using a constant group analyse the
scandals. As acorrelation between the structure
result of theseof the Board of Directors and the
(Coloroll
andmanagerial earnings comparing
Polly Peak, etc. )two periods of time: the period
and of the lack ofbefore the appearance of the
trust
in
theCodes of Good Practice written
by the Cadbury Committee1994
financial
reporting
ofand the period after the
several
Britishappearance of the Code of Good
enterprises,
thePractices. They conclude that
after the appearance of the Code
Financial
of Good Practices the managerial
Reporting
earnings diminished, given the
Council,
thenew
London
Stock
Exchange and the
178

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

accounting positivist theory. The

weaknesses characterising the
results obtained appeared due to the
management
fact that the different theoretical
structure
and methodological approaches
proposed by the through which this subject was
Code.
studied. In France, the management
plays a central role in manipulating
The
relation betweenthe profit. Using the results of 32
the
corporativeinterviews organized in 13
governance andcompanies, Lambert and Sponem
the
Parmalat(2005) argue that the spread of the
bankruptcy
isAnglo-Saxon model of corporative
dealt with bygovernance
promoted
this
Buchanan
andbehaviour.
Far
from
the
Yang (2005). Atopportunism hypotheses worded
the base of the
out by the positivist accounting
Parmalat
company failuretheory, profit manipulation is a tool
is the conflict ofthrough which the management
interests betweenwants to get large legitimacy within
the organizations and/or adopt what
founding
they pretend to be ethical
chairman
behaviour. They also tackle the
(majority
shareholder) andpressure come from the investors in
the
minoritydirect relation to the profit
shareholders,
amanipulation,
the
profit
conflict rooted inmanipulation seen as an ethical act
a
corporativeas well as the role of the accounting
governance basedinformation in the Anglo-Saxon
on an opportunistmodel of corporative governance.
behaviour
Financial Markets
favouring
the
majority
There
are
significant
shareholder
proofs
of
the
use
of
creative
against
the
accounting
by
the
big
companies
minority
shareholder. Thelisted. Yet, little is known about
development ofthe process through which such
practices are drawn up and
creative
accounting in thismanage to flinch the regulations
context
isand legal sanctions. Atul K. Shah
connected to the(1996) examines the process of a
failure of thecreative conformity in the case of
regulating bodiesconvertible bond issuing by the
regarding
thecompanies quoted on the Stock
Exchange in Great Britain during
corporative
governance,
as1987-1990. There has been an
well
as
theactive dialectic on the creativity
in
creating
these
auditors
andused
instruments,
an
attempt
to
break
financial
institutions lackthe laws in order to break them
again. The results show that a
of vigilance.
small group of professionals from
The
the finance, law and accounting
problem of thefields have collaborated to draw
profit
up these instruments. They helped
manipulation hasthe issuers to manage the
been
studiedfinancial reporting process in
through
thesuch a way that the conformity is

ensured. Wheremanipulated earnings for the

the contributorssubsequent granting of dividends
have the capacityto the shareholders, coming up to
to
use
suchthe
investors
expectations
creative
regarding the companys ability to
conformities
pay its dividends. The flexibility
referring to thein selecting the accounting
resources
andmodels sometimes motivates the
abilities
theymanagers to choose between the
have,
theaccounting options or simply to
regulating bodieschange those that they have
are confrontingalready used due to the desire to
themselves withraise the final result, that is to
irregularities
manipulate the result. Therefore,
coming from theirthe manipulating behaviours in
own yard.
the Turkish companies quoted on
An
the Stock Exchange are detected
empirical studyby Atik (2009) using empirical
developed
bytests, tests tackling discretionary
Kinnunen et all.accounting
changes
(DAC).
(2000) in Finland,Parallel with the study performed
shows the factby Moses, quoted the above
that the firmsmentioned author, the result
issuing shares forsmoothing is accepted as one of
high
discountsthe motivations for DAC and the
use this escapegroup of firms is divided into
door in order totwo: manipulating and nonmanipulate
themanipulating, based on Moses
financial
manipulating behaviour index.
information
The results show as possible
comparing
tomotivations for DAC: the result
those providingsmoothing,
the
economic
reduced discountscharacteristic when DAC are
for the shares ormade and the Turkish firms
the firms whichdesire to have profits aiming at
do
not
issuezero.
shares.
The
managerial policy
has in view the
use
of
these
179

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

in the public sector was

determined based on the balance
budgets and treasury budgets.
The
Even from 1990 the superiority of
the accrual basis of accounting
Public
used in the context of public
Sector
sector was emphasised both by
Benito etpractitioners as well as by the
all.
(2008)academicians. Vinnari and Nasi
analyze a few(2008) demonstrate that the
private financingaccrual basis of accounting
proposals in theprovides opportunities to use
public
sectorcreative accounting or the
which took placemanagerial earnings in the public
in recent yearsector, at least as long as the
Spain.
Theyaccounting is held according to
demonstrate thatthe national regulations rather
the new financingthan to IAS/IFRS.
methods
Financial Reporting
incorrectly
evaluated
as
According to Barlev &
being
private,Haddad (2003), the relevance of
have been madethe financial statements must be
in the end by themeasured by reporting to the:
government from

the
budgetary
resources.
A
a
postponing of the
s
budgetary
s
acknowledgement
o
of
some
c
transactions
i
accompanied by a
a
wrong
t
information
on
i
the
debts
o
presented in the
n
financial
statements
b
afferent
to
e
projects are the
t
main
w
consequences of
e
the use of the new
e
financing
n
methods. Shortly,
this is a clear
t
example
of
h
creative
e
accounting used
in
order
to
m
positively respond
a
to
the
r
convergence
k
criterion imposed
e
by the EU.
t
Traditional
ly, the financial
a
balance of the
n
economic entities
d

t
h
e
e
s
t
i
m
a
t
e
d
p
r
o
f
i
t
s

c
o
n
t
r
i
b
u
t
i
o
n
o
f
t
h
e
a
d
m
i
n
i
s
t
r
a
t
i
o
n
f

u
n
c
t
i
o
n

r
e
d
u
c
t
i
o
n
o
f
t
h
e
a
g
e
n
c
y

s
c
o
s
t
s

s
t
r
e
a
m
l
i
n
e
o
f
t
h

shareholders capital. The fair value

(FVA)
ensures
a
complete
m
information, compatible with the
a
reality and transparent. The
n
application of the FVA opens up the
a
way to the volatility of earnings
g
and managerial earnings in relation
e
to the application of the historical
m
cost (HCA).
e
Other authors, Markarian
n
&
Pozza
(2008), based on
t
empirical researches referring to
motivational factors of the

earning manipulation in the firms

supply with majority family capital,
of
investigate the conflict of
relevan interests occurred from the
agencys theory and word out
t
inform hypotheses assuming that those
firms are less sensible to the
ation motivations
of
the
result
to thesmoothing than the firms with a
stakeh non-family capital. The research
olders. hypotheses are focused on the
Also, theproblem of costs capitalizing the
development costs.
development and
improvement
of
Conclusions
the
accounting
Our paper deals with
standards reveal
conceptual
and
motivational
the fact that the
historical cost isaspects of the appearance and
gradually replaceddevelopment of creative accounting
by the fair value.practices. The concept of creative
The fair valueaccounting is analysed in its
(FVA) in contrastevolution, from the first definitions
to the historicalfound in the specific literature to
contemporary
modern
cost hiding the realthe
approaches
connecting
this
concept
financial position
and the profit,implicitly to cultural, political or
represents
aeven psychological aspects. To
relevant
valueunderstand the meanings of the
(according to theconcept mentioned, our study
same authors). Thedescribes in detail a theoretical
reporting based onframework proposed by some
FVA draw theauthors but also the objectives of
the accounting figure manipulation.
shareholders
attention on theAlso, there are descriptions of the
capital value andactors of this game of creative
streamline
theaccounting, of the conditions
generating different accounting
administrative
function.
Themanipulation practices and not in
managers
arethe least the manipulation
asked to watch the
value
of
the
180

Annales Universitatis Apulensis Series Oeconomica, 11(1), 2009

controversial aspects attachable to

this subject such as the negative
values versus the positive values of
intentions of thethe creative accounting.
enterprise
Being aware of the
managers.
Alimitations of our research, we
distinct part ofwill concentrate our efforts on a
our study has inmore deepened analysis of the
cases
of
creative
concern a shortfamous
review of theaccounting and fraud and on the
main
aspectsother circumstances which it is
tackled with at thenever known when they might
European level ingive birth to some manipulations
the
specificin order to distort the real image
of the enterprises financial
literature
regarding the rolestatements. For this, the study of
played by creativeliterature must be more ample in
accounting in thetime and space and it should
life
of
anclearly emphasise the areas
enterprise.
Touncovered by the existing
achieve
thisliterature in order to see which
objective,
weelements are worth studying with
have
analysedpropensity.
approximately 40
academic articles
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182

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