Question 4

Part A

Accounting is the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the results thereof (AICPA).

Creativity is the ability to transcend traditional ideas, rules, patterns, relationships, or the like and to create meaningful new ideas, forms, methods, and interpretations.

A Creative Accounting approach creates a new kind of accounting. It is creative mainly because their primary mission does not follow accountants or tax laws but mostly a "clever idea" of the owners or in other words "creative attitude" where the imagination plays a decisive role.

Others see creative accounting as manipulative, dishonest and deceptive.

Required:

i. What do you understand by creative accounting?

ii. Do you think creative accounting can be used to enhance reporting of financial information to report users or is it simply a part of fraudulent accounting behaviour?