Designing a Domain-specific Causal Model for Creative Accounting

Document Type : Research Paper

Authors

1 Ph.D. Candidate, Department of Accounting, Kashan Branch, Islamic Azad University, Kashan, Iran.

2 Associate Prof., Department of Accounting, Bandargaz Branch, Islamic Azad University, Bandargaz, Iran.

3 Assistant Prof., Department of Accounting, Kashan Branch, Islamic Azad University, Kashan, Iran.

10.22059/acctgrev.2023.351110.1008751

Abstract

Objective: Creative accounting can be seen as a process that utilizes accounting knowledge to influence financial indices in information disclosure without violating policies and accounting rules and standards, leading to distortion of the information provided by the managers. This research sought to design and interpretatively evaluate the appearance contexts of creative accounting at the level of capital market companies.
Methods: The study employed a mixed research methodology, categorizing it as developmental research based on the obtained results. Concerning the objective, this research sought to prioritize research components at the level of capital market companies in terms of effectiveness by relying on an exploratory study and an interpretive rating matrix. The research approach in this study can be classified as a hybrid type due to the unique logic of data collection. It explores a phenomenon without a comprehensive framework in the theoretical areas of accounting at the level of capital market functions, where consensus on such a framework is lacking. Thus, it was initially tried to provide the dimensions of the creative accounting model in the form of a multidimensional model through analyzing the qualitative part by relying on the Grounded Theory method. To this end, Glazer's emergent approach was used to develop a creative accounting model by utilizing interviews made with experts during three stages of coding. The paper benefited from matrix checklists based on pairwise comparisons in the quantitative part. The target population in the qualitative part included 12 accounting professionals and university professors who were considered experts both scientifically and experimentally. In the qualitative methodology section, the snowball sampling method was employed for sample collection, involving theoretical sampling and methods for sample determination. However, the target population in the quantitative part included 20 financial managers of listed companies who were chosen based on work experience and level of technical and specialized knowledge through a homogeneous sampling method.
Results: The research results in the qualitative part identified three categories, six components, and 36 conceptual themes in the form of a six-dimensional model, which were obtained through the three stages of open coding, axial coding, and selective coding in the grounded theoretical analysis using the Glazer's approach. Also, the results in the quantitative part, by utilizing matrix ranking analysis, demonstrated that the influence percentage of the foresight weakness component of the basis of creative accounting is higher than the other components of creative accounting. This implies that the absence of professional perspectives in accounting enhances the probability of financial distortion through creative accounting.
Conclusion: The obtained results indicated the fact that the weakness of foresight in the field of accounting and realistic disclosure of information may lead to the enhanced shadow of creative accounting over the functional level of capital market companies and expand the context of emerging creative accounting. This area of accounting procedure does not benefit from sufficient philosophy and knowledge support, and this issue creates a distance between the cognitive functions of accounting and the main core, which aims to increase transparency and protect the rights of stakeholders. As a result, accurate evaluation of the functional realities of companies turns out to be unfeasible.

Keywords

Main Subjects

References

 
Abed, I, A., Hussin, N., Ali, M, A., Haddad, H., Shehadeh, M., Hasan, E, F. (2022). Creative Accounting Determinants and Financial Reporting Quality: Systematic Literature Review, Risks. MDPI, 10(4), 1-25.
Adámiková, E., Čorejová, T. (2021). Creative Accounting and the Possibility of Its Detection in the Evaluation of the Company by Expert. JRFM, MDPI, 14(7), 1-12.
Ahmadi, F., Nasiryani, KH. & Abazari, P. (2008). Delphi Technique: A Tool in research, Iranian Journal of Medical Education, 8(1), 175-185. (in Persian)
Akpanuko, E.E. & Umoren, N.J. (2018). The influence of creative accounting on the credibility of accounting reports, Journal of Financial Reporting and Accounting. 16(2), 292-310.
Amat, O., Gowthorpe, C. (2004). Creative Accounting: Nature, Incidence and Ethical Issues (April 2004). UPF Working Paper No. 749, Available at SSRN: https://ssrn.com/abstract=563364 or http://dx.doi.org/10.2139/ssrn.563364
Asgari Alouj, H., Nikbakht, M., Karami, G., & Momeni, M. (2020). Development of the Beneish Model by Combining Artificial Neural Network and Particle Swarm Optimization Algorithm for Earnings Management Prediction. Accounting and Auditing Review, 26(4), 615-638. (in Persian)
Balaciu, D., Bogdan, V., Vladu, A, B. (2009). A brief review of creative accounting literature and its consequences in practice. Annales Universitatis Apulensis Series Oeconomica, 11(1), 35-51.
Birkey, R. & Hausserman, C. (2019). Inducing Creativity in Accountants’ Task Performance: the Effects of Background, Environment, and Feedback, Calderon, T.G. (Ed.) Advances in Accounting Education: Teaching and Curriculum Innovations (Advances in Accounting Education, Vol. 22). Emerald Publishing Limited, Bingley, pp. 109-133.
Cernusca, L., David, D., Nicolaescu, C., & Gomoi, B. (2016). Empirical Study on the Creative Accounting Phenomenon. Studia Universitatis Vasile Goldis. Arad Economics Series, 26 (2).
Chahardahchriki, M., Bolo, Gh., Reisivanani, E., Babajani, J. & Taghavifard, M. (2022). Identification and Ranking of Creative Accounting Indicators Using Network Analysis Process Technique, Accounting and Social Benefits, 12(1), 21-40.(in Persian)
Charmaz, K. (2011). Grounded theory methods in social justice research. The Sage handbook of qualitative research, 4(3), 359-380.
Faghfour Maghrebi, Y., Sajadi, S. H., Asnaashari, H., & Rezaeian, A. (2020). Investigating the Mediating Role of Understanding, Processing Fluency and Credibility of an Earnings Press Release on the Relationship between Language Sentiment, Readability, Sophistication and Investors’ Judgment and Decision-making. Accounting and Auditing Review, 27(1), 87-113. (in Persian)
Fernández, W. D. (2004). The grounded theory method and case study data in IS research: issues and design. In Information Systems Foundations Workshop: Constructing and Criticizing, 1(1), 43-59.
Ghashghaii, A. & Biglar, K. (2019). The Position of Creative Accounting among Iranian Auditors with an Emphasis on Ethics and Professional Auditing Behavior, Accounting and Management Perspective Magazine, 2(20), 100-113. (in Persian)
Glaser, B. G. (1992). Theoretical Sensitivity: Advances in the methodology of grounded theory. Mill Valley, Calif.: Sociology Press.
Glaser, B.G. & Holton, J. (2007). Remodeling grounded theory, Historical Social Research/Historische Sozialforschung. Supplement, 19(32), 47-68.
Goto, T., Yamamoto, G. (2023). Debt issuance incentives and creative accounting: Evidence from municipal mergers in Japan, Journal of the Japanese and International Economies, 68(1), 32-49. https://doi.org/10.1016/j.jjie.2023.101259
Gupta, C.M. and Kumar, D. (2020). Creative accounting a tool for financial crime: a review of the techniques and its effects. Journal of Financial Crime, 27(2), 397-411.
Hassanzadeh, S., & Mashayekhi, B. (2019). A Conceptual Model for the Reasons and Circumstance of Earnings Management in Iranian Banks. Accounting and Auditing Review, 26(3), 371-393. (in Persian)
Ismailpour, R., Adel, A., Shahmohammadi, M. (2017). Providing an Interpretive Structural Model of Supplier Selection Indicators Based on Corporate Social Responsibility, Industrial Management Studies, 47(15), 45-70. (in Persian)
Kelalianmoghadam, H., Maharati, Y., Ashrafi, M., Khorakian, A. (2019). Identifying the Factors Affecting the Recognition of Opportunities for Social Value Creation in Iran: Foundation data theorizing with their Appearance Approach (Glyzeri), Social Sciences Ferdowsi Univercity of Mashhad, 17(1), 87-141. (in Persian)
Kordestani, G., & Tatli, R. (2016). The Prediction of Earnings Manipulation: Development of a Model. Accounting and Auditing Review, 23(1), 73-96. (in Persian)
Olojede, P., Erin, O. (2021). Corporate governance mechanisms and creative accounting practices: the role of accounting regulation. International Journal of Disclosure and Governance, 18(2), 207–222
Qatawneh, A, M., Alqtish, A, M. (2017). Critical Examination of the Impact Accounting Ethics and Creative Accounting on the Financial Statements. International Business Research, Canadian Center of Science and Education, 10(6), 104-111.
Reischmann, M. (2016). Creative accounting and electoral motives: Evidence from OECD countries. Journal of Comparative Economics, 44(2), 243-257.
Saleh, M, M, A., Jawabreh, O., Abu-Eker, E, F, M. (2021). Factors of applying creative accounting and its impact on the quality of financial statements in Jordanian hotels, sustainable practices. Journalof Sustainable Finance & Investment, https://doi.org/10.1080/20430795.2021.1962662
Senn, J., Luque-Vílchez, M. and Larrinaga, C. (2022). The role of accounting in the assessment of knowledge production from a multi-stakeholder’s perspective, Sustainability Accounting. Management and Policy Journal, 13(5), 1033-1059.
Speziale, H.S., Streubert, H.J. & Carpenter, D.R. (2011). Qualitative research in nursing: Advancing the humanistic imperative. Lippincott Williams &Wilkins.
Supriya, Kh., Vidhi, B. (2018). A Comprehensive Review of Literature on Creative Accounting. International Journal of Business Insights and Transformation, 10(1), 46-60.
Susmuş, T., Demirhan, D. (2020). Creative Accounting: A Brief History and Conceptual Framework. Akademik Bakiş Dergisi, 2(3), 1-20.
Ustinova, Y., Gupta, Ch, M., Shaposhnikov, A. (2022). Creative Accounting Detection Methods: Foreign Experience, Advances in Social Science. Education and Humanities Research, 632(2), 193-219.
Accounting and Auditing Review
Volume 30, Issue 3
2023
Pages 532-559

Files

Share

How to cite

Statistics