Accounting Manipulations in Corporate Financial Reports: Study of an Asian Market

Accounting manipulations (AM) in corporate „financial reports" are perennial; they had occurred in all eras, in all countries and affected millions of corporations. Unfortunately, there are some „loopholes" in accounting and auditing standards, which provide ample leeway to corporate managers" and thus, motivate accounting professionals to make frequent manipulations in corporate financial reports. In fact, accounting manipulation (AM) involves the intentional „cooking-up" of financial records & reports towards a pre-determined target. Every company indeed „maneuvers" the numbers reported in its financial reports (FR), to a certain extent, to achieve their „budgetary" targets and be generous to „reward" senior managers. Factors such as greed, desperation, immorality and bad judgment drive some executives to „fudge" the FR and account books. From Enron, WorldCom to Satyam, it appeared that window-dressing of FR leading to AM is a serious problem that is increasing both in its frequency and severity, which undermines the „integrity" of FR and „eroded" investors" confidence. The responsibility of preventing, detecting and investigating financial frauds rests squarely on Board of Directors and they should adopt „preventive" steps. Despite the „raft" of CG, and financial disclosure „reforms", corporate accounting still remains „murky" and companies continue to find ways to play „hide-and-seek" game with the FR system.