Abstract:
Creative accounting can be described as an accounting practice that may or may not follow the accounting standards and principles. However, it deviates from the main idea of those standards and principles in order to present the desired picture of the business. Creative accounting is not illegal, but unethical since it doesn’t meet the main objective of financial reporting – to present fair and objective picture of the business. The practice of creative accounting usually includes overstating assets, high stocks, decreasing expenses, changes of depreciation methods, or presenting provisions as an asset. Creative accounting techniques follow the changes of accounting standards, which are modified in order to reduce financial information manipulation. However, such changes in accounting standards often result in new opportunities for accounting manipulation. This study aims to shed light how creative accounting affect corporate performance and three variables were looked into return on assets, return on investment and market share and in the result after the hypothesis have been tested shows that creative accounting does not have a significant relationship between return on assets, return on investment and market share, but has a positive effect on the three variables.
