For correspondence:-
Received: 25 September, 2018 Accepted: 30 December, 2018 Published: 31 December, 2018
Citation: Creative Accounting Practices and Shareholders’ Wealth. Account Tax Rev 2003; 2(4):58-74 doi:
© 2003 The authors.
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Abstract
This study was designed to establish the effect of creative accounting on shareholders’ wealth. Inventory valuation, depreciation policy and debtors ageing schedule were used as proxies for creative accounting. The study reviewed the theories and techniques of creative accounting as well as the determinants of shareholders wealth. Empirical studies on creative accounting were reviewed. So were the scandals caused globally by creative accounting? The study found that frequent changes in inventory valuation and in depreciation policy affect shareholders wealth. It found that frequent manipulation of ageing schedule for the purpose of determining bad and doubtful debts provision had no significant effects on shareholders wealth. The study recommends stricter monitoring of entities to ensure full disclosures of changes in accounting policies with a view to guarding against immoral behaviors.
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