Creative Accounting

1022 Words Jul 3rd, 2012 5 Pages
Creative Accounting
Creative accounting is a term that often implies illegal or fraudulent practices in the U.S. (Moneyterms, 2006). The objective of the following paragraphs is to explore some definitions of creative accounting from different perspectives, discuss some advantages and disadvantages of creative accounting, and explain a real life example of creative accounting. Through these paragraphs I hope to also touch upon some of the ethical issues involved in engaging in creative accounting practices.
Definitions of Creative Accounting
From Different Perspectives
Blake (1998) provides four definitions of creative accounting provided from different perspectives. The first perspective was written by a business journalist:
“Every
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Many other disadvantages could arise through the use of creative accounting as well.
Real Life Example of
Creative Accounting
When businessmen hear the name Bernard Madoff, some of the things that come to mind are liar, swindler, scandalous, manipulator, creative accountant, and many more. Some may even think of Bernard as a genius as he pulled off the largest creative accounting scheme in U.S. history, and recently pleaded guilty to his actions (Glovin, 2009). Basically, Madoff was able to secure billions of dollars of investment funds money from his clients by paying those that withdrew money with money from clients that were new to deposit money in to funds. Clients would happily keep their funds invested with Madoff because he would report large profits to the investors, even though he was taking the money, but the investors felt secure with the reports given to them that showed the false numbers. “They were blinded by the fees they were earning.” said William Glavin, according to Glovin (2009). Over time, he was able to steal
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