1. One of the major impacts of accounting scandals is that consequences often stretch far beyond the immediate connes of the rm. The impact of accounting scandals and, more pervasively, creative accounting can thus be divided into the short-term, immediate effects on those involved and longer, more diffuse effects. The immediate consequences are that the company itself often either collapses, is taken over, or at the very minimum its share price slumps and investors lose money.

(Michael John Jones

Creative Accounting, Fraud, and International Accounting Scandals

John Wiley & Sons Ltd, the Atrium,

Southern Gate, Chichester, England)

Required:

1. Explain the effects of creative accounting and accounting scandals on the job performance of accountants (auditors) in reporting financial statements. (3 marks)

2. Critically evaluate the short-term economic and political consequences of creative accounting practices in the corporate sectors. (2 marks)