Hearing of different scams is very common, but people who are associated with scammed companies are the ones who really got affected. Well not following accounting rules and regulation and deviating from those standards is a common practice which is known as creative accounting. Creative accounting is a root cause of all accounting scandals which give misrepresentation to various income statement and assets valuation. Some companies which do not follow the accounting rules and give a unfair and distorted information due to which users are misguided and take the wrong financial information. It is unethical to have undue use of power as companies tend to weaken the authority of accounting regulators and give unclear information to users. Here the term ‘creative accounting’ can be used actually which distorts reality but it is not unlawful to practice it without violating the rules. In this appear we have discussed the different techniques and motives associated with creative accounting and some Indian companies cases have been discussed those were indulged in accounting scandals. Therefore in last we concluded that the standards and regulations need to revise by keeping in mind without losing any scope of executing the misinterpretations and a watch shall be kept by the SEBI (Securities and Exchange Board of India), RBI (Reserve Bank of India) to avoid fraud.
Creative accounting, earning management, income smoothing, accounting principles, accounting scandals
