Creative Accounting: Auditors’ Roles in the Detection of

Financial Fraud
by Zuraidah Mohd-Sanusi and Yusarina Mat-Isa

This Chapter Covers

An introduction to creative accounting concepts and methods.
Areas of possible manipulation of company accounts.
The use of a checklist to help in the detection of creative accounting practices and accounting fraud.
Case studies of two companies in Malaysia that have used creative accounting practices.
What is expected of auditors in detecting creative accounting practices.

Introduction: Understanding the Concepts of Creative Accounting

“Creative accounting practices” is a term used to describe any means that may be employed to manipulate
financial data, and it includes the aggressive choice and application of accounting principles as well as
fraudulent reporting (Mulford and Comiskey, 2002). These practices may fall within or beyond the boundaries
of Generally Accepted Accounting Principles (GAAP). Creative accounting practices cover a wide range of
areas, especially premature recognition of and over- or underestimation of revenue, aggressive capitalization
and extended amortization policies, misreporting of assets and liabilities, and getting creative with the
income statement and cash flow reporting. If an organization wishes to practice creative accounting, there is
plenty of scope for the manipulation of accounting information. Such manipulation may well leave external or
other interested parties confused as to what is real or unreal, or true or false, in a published set of financial
statements.
Accounting techniques are normally chosen to produce more meaningful financial numbers, and any
changes in these techniques will usually be clearly indicated in the notes to the accounts. In contrast,
creative accounting is more often applied as way of hiding a particularly bad performance. The management
may opt for accounting techniques that will give the impression of an exceptionally good year, or one
that presages a sound financial performance in the future. Reported results may be smoothed out to
give an impression of stability or sustained improvement, or to boost assets to avoid takeover (Mulford
and Comiskey, 2002). Another benefit that management may derive from this practice is to influence the
confidence of shareholders by being able to report stable earnings or positive changes in anticipated income.
It is difficult to draw a line in regard to creative accounting practices because of the complexity of business
transactions, which may make it difficult to detect misstatements or omissions. GAAP offers various
accounting methods for companies to choose from, and which method a company adopts will depend on the
nature of its business. The availability of these different methods provides options for companies to choose
the one that best projects their financial performance. Although GAAP requires consistency in the adoption
of an accounting method, some companies may exploit the opportunity to use more than one over the years.
Even with the restrictions imposed by rules, regulations, and standards, there are many ways in which
accounting methods can be manipulated that give scope for a wide range of creative accounting practices.
For example, the ambiguity that arises in the area of provision expenses and valuation of assets could
lead to the adoption of methods that favor the company but not the stakeholders. The loopholes in certain
accounting areas, or unclear definitions in financial reporting standards, may also provide opportunities for
the financial players to manipulate the numbers—sometimes very aggressively.
In many instances creative accounting practices are associated with fraud. There is a high possibility that
misstatements are the result of the managers misrepresenting the company’s true financial condition. A
misstatement may be attributed to changes in the regulatory requirements or accounting rules, or it may be
part of a management strategy on earnings (Coffee, 2004). Management has a strong incentive to manage
earnings in order to maximize its own compensation, particularly when compensation is based on measures
of earnings (Kothari, Leone, and Wasley, 2005). Maximizing compensation is not the only incentive for
managers to engage in creative accounting practices, as shown in Figure 1.

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Figure 1. Expected rewards of creative accounting practices
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) recognized that frauds
went to the very top of many organizations in which a significant portion of the company was owned by
founders and board members. COSO’s 1999 study “Fraudulent Financial Reporting: 1987-1997” has found
that in 72% of cases the CEOs appeared to be associated with the financial manipulation. It showed that
managers had incentives to manipulate earnings around the specific, predictable events of the periodic
earnings reporting as they expected the returns to be rewarding.
“In many instances, creative accounting practices are associated with fraud. There is a high possibility that
misstatements are the result of the managers misrepresenting the company’s true financial condition.”
Whether creative accounting practices result in fraudulent financial reporting depends on the intentions of
the managers. Fraud and error, although both show up as misstatements, differ in substance depending on
whether intention is present or not. Fraud occurs when a misstatement is made with knowledge of its falsity
and there is an intention to deceive, whereas error is not deliberate and there is no intention to deceive other
parties. Although not all creative accounting practices amount to fraud, it is sometimes hard to distinguish
between fraud and creative window-dressing in financial statements.
The International Standard on Auditing 200 (ISA 200) requires that an audit be designed to provide
reasonable assurance that both errors and frauds in the financial statements are detected, and the audit
must be planned and performed with an attitude of professional scepticism and due professional care.
Hence, auditors need to be vigilant for the indicators of creative accounting practices. They are required to
detect the “red flags” of creative accounting practices that may signal fraudulent financial reporting. These
flags may not necessarily indicate fraud, but auditors need to be on the alert for them. A failure to conduct an
audit with proper care may expose the auditor to potential legal liabilities.

Areas of Possible Manipulation and the Red Flags Signaling Fraud

There are various ways companies can maneuver their financial reporting through the wide range of
accounting treatments allowed in GAAP as well as beyond what is set out in accounting standards. Some
of the methods may be considered legal, while other techniques are totally unacceptable and illegal. The
practices of creative accounting can be summarized under five main categories, as shown in Table 1.
Table 1. Categories of creative accounting practices, with examples

Use of different Subjective Artificial Structuring Timing

accounting or estimated transactions of corporate
methods quantities transactions
For instance, the Certain entries Artificial For example, Genuine
choice of inventory in the accounts transactions can business transactions can
method: a company involve an be entered both to combinations can also be timed so as
may choose unavoidable degree manipulate balance be structured to to give the desired
between a first in, of estimation, sheet amounts qualify for pooling impression in the
first out or last in, judgment, and/or and to move or purchase accounts.
first out method for prediction. profits between accounting. The timing of
inventories. Estimation of accounting periods. Lease contracts can inventory shipments
The choice numerous future This is achieved be structured so that or purchases, or of
of accounting economic events by entering two lease obligations receivable policies,

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depreciation: such as expected or more related are on- or off- which will affect cost
straight line and lives and salvage transactions with an balance sheet. allocations and net
accelerated values of longterm obliging third party, Equity investments revenues.
depreciation assets, obligations normally a bank. can be structured Selection to make or
methods. for pension to avoid or require defer expenditures,
The company benefits and other consolidation. such as R&D,
can choose the postemployment advertising, or
accounting policy benefits, deferred maintenance.
that conveys a taxes, and losses
preferred image. from bad debts or
asset impairments.

Adapted from Amat, Perramon, and Gowthorpe (2007) and Healy and Wahlen (1999).
Dishonest management has lucrative options in its choice of accounting methods for the recording of
inventory amounts and asset depreciation. This flexibility, legitimate use of which is allowed by GAAP,
offers opportunities to exaggerate or minimize company profits. Managers may also attempt to manipulate
earnings where judgment or estimation of certain accounts is needed in the financial reporting. Determining
the amount of certain expenses—for example, provision for doubtful debt and impairment of securities
—can involve high levels of ambiguity. Companies may artificially recognize profits before they are
realized, or they may try to book leased assets into the balance sheet. Another method is through the
structuring of transactions to alter financial reports to either mislead stakeholders about the underlying
economic performance of the company, or to influence the outcomes of contracts that depend on reported
accounting numbers. This is especially true when some off-balance sheet items, such as commitments and
contingencies, are exploited to project a better financial position. Timing is another area that managers can
manipulate to show a better than actual financial position, an example being the deferment of recognition of
R&D costs.
Some companies may apply several techniques in making their accounting figures appear to be in good
shape. Parmalat, one of Italy’s largest industrial empires, concealed billions of euros of debt through fictitious
sales by its shell companies, as highlighted in Figure 2.

Figure 2. Example of creative accounting practices at Parmalat

There are countless ways in which companies can manipulate their financial statements, and in most
cases the red flags or fraud indicators which suggest that fraud might be happening are just too obvious to
ignore. For instance, when a company relies heavily on external debt, it tends to manipulate its revenue to
demonstrate that it has the ability to pay off the debt. Management is under pressure not only from the high
level of debt itself but also from the large interest payments incurred, which affect profits and reduce cash
flow. Large debts increase the tendency for managers to engage in creative earnings management practices
(see, for example, Beatty and Weber, 2003). Auditors should therefore be on the lookout for “red flags” if
their client is highly leveraged as past experience indicates a linkage of creative accounting practices with
such leverage.
Late submission of financial statements can also be a warning signal. Failure to submit a company report on
time may happen for many reasons: the company may be in financial difficulty, there may be disagreement
among management, or regulatory requirements may not have been complied with. Any one of these could
be the factor that pushes management into adopting creative accounting practices, so that in cases of late
submission auditors should be especially alert for indicators of fraud.
The prevalence of cases of alleged manipulation of financial statements suggests that the currently available
tools for financial analysis and other methods that have been used to detect such practices have failed to
detect the manipulation activities. It shows that additional tools are urgently required to detect the red flags of
creative accounting practices that, if taken too far, may lead to fraudulent financial reporting. One of the tools
that can be exploited for this purpose is the creative accounting checklist.

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A Checklist to Detect Creative Accounting Practices
A tool for detecting the red flags of fraud has been discussed thoroughly by Mulford and Comiskey in their
book, The Financial Numbers Game: Detecting Creative Accounting Practices (2002). Although the authors
suggested many types of criteria, not all the information required would be directly available in the company’s
financial reports. Hence, in developing the creative accounting checklist presented here, we have modified
the method introduced by Mulford and Comiskey to only include revenue, assets, and amortization criteria,
as shown in Table 2.
Table 2. Creative accounting checklist (modified after Mulford and Comiskey, 2002)

No. Item
Revenue checklist
1 Does the company have a right of return policy?
2 Has there been any change in revenue recognition
policy?
3 Was the revenue of the company recognized before
the product/service was available?
4 Does the company have the physical capacity to
generate the reported revenue?
Assets checklist
5 Has the company changed its credit policy?
6 Have payment terms been extended?
7 Has the company changed its inventory method?
8 Has the company reclassified its properties, plants,
and equipment (PPE)?
Amortization policies checklist
9 Has the company extended the amortization and
depreciation period for capitalized costs?
10 Is there an example of a prior-year write-down of
assets that became value-impaired?
11 Is there any reason to believe that normal operating
expenses are converted to reserves?

Revenue is the most common item to be manipulated by management as there are too many alternative
ways to recognize it, whether through legal or illegal techniques (Albrecht et al., 2009). The two most
common practices are premature recognition of revenue and overstatement of revenue. The former involves
recognizing revenue from legitimate sales in a prior period, while the latter entails the recording of more
revenue than is actually realized. These two practices—which in some cases may be hard to distinguish—
can be used to show a greater earnings capacity than is actually the case.
Similarly, assets are often overvalued in an attempt to bolster the company’s financial position and net worth.
Besides such overvaluation of assets, which is usually perpetrated by management, misappropriation of
assets is one of the most common frauds committed against a company, and this is usually done by internal
staff. As assets have a close link with revenue, there can be a strong motivation to creatively alter asset
figures in the balance sheet.
Amortization is the deduction of capital expenses over a specific period of time, usually the life of the asset.
This means that amortization is related in one way or another to the assets and revenue of a company.
One of the most common techniques used by companies to improve the financial figures is to extend the
amortization period. When the amortization period is extended, expense recognition is postponed to a later
period, which results in a boost to the current earnings.

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Application of the Creative Accounting Checklist—A Preliminary Study
The modified creative accounting checklist shown in Table 2 was applied in a preliminary study conducted
on the top 100 companies listed on the Bursa Malaysia Berhad (financial institutions were excluded) using
financial reports for the year 2008. Each annual report was analyzed using a content analysis method.
The 11 indicators in the checklist were measured using a score of 0 or 1; 0 was given for each item in the
checklist with a “no” answer, and a score of 1 was given to each item with a “yes” answer. Thus, for the three
categories in the checklist—revenue, assets, and amortization—the maximum possible scores are 4, 4, and
3, respectively. The maximum overall score on the checklist as a whole would, of course, be 11.
The companies we studied scored in the range 0 to 5. Figure 3 shows the results for the top-scoring 23
companies—those with a total score in the range 3–5. Two firms scored the highest (5), two scored 4, and
the remaining 19 firms scored 3. These scores were attributable to high scores in the revenue category,
which could indicate that revenue is one of the main areas for manipulation. The majority of the top 23
companies scored 1 to 2 in the assets category, whereas about half of the 23 companies scored 1 in the
amortization category, with none scoring 2 or 3. This indicates that there is no apparent pattern of possible
manipulation in the assets and amortization categories.

Figure 3. Frequency analysis of 23 companies with highest checklist scores

Figure 4 gives a detailed breakdown for the four top-scoring firms (those with total checklist scores of 5 and
4). Firm D, an oil and gas company, scored the highest mark, of 3, for an individual category, revenue, but
scored 0 in the amortization category. Firm C, a property development company, obtained the highest score
(3) in the assets category, but scored 0 in the revenue category. The highest overall score of 5 was turned in
by Firm A and Firm B, both of which are sizable companies with cross-border, diversified businesses.

Figure 4. Checklist score breakdown for the top-scoring four companies

The score breakdowns presented in Figure 4 may reflect the actual financial predicaments of some of these
companies. For example, in 2010 Firm B sought legal counsel following a major loss of Malaysian ringgit
(MYR) 2.1 billion, although it had had very good years prior to that. The loss incurred was related to cost
overruns on four projects over the last few years, including the building of oil and gas installations in Qatar,
the Bakun hydroelectric project in Sarawak, and a marine project involving the construction of vessels for
use in the Qatari project. Hence, it is not surprising that the company should have a high creative accounting
score for its 2008 annual report.
With Firm A, on the other hand, no obvious issue has surfaced in recent years, but the company has been
under close scrutiny because of its volatile return on assets, which swung from 66% in 2009 to 44.5% in
2010, and a gradual loss of market share to a close competitor. This company has been in stiff competition
with its rival and acquired a large tranche of new assets in 2009 to beef up its operations. Thus, with a score
of 2 in the assets category, a careful analysis of the company’s reported figures relating to assets might be
worthwhile.

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Case Study

Two Companies in Malaysia Using Creative Accounting

In recent years several companies in Malaysia have been involved in misstatements of financial information
in their annual reports that led to investigations by the Securities Commission Malaysia (SCM) and the Bursa
Malaysia Berhad (BMB), the securities market regulators. Here we will will look at two anonymous cases,
both of which involve public listed companies in Malaysia, and consider the question of how auditors could
have helped in detecting the creative accounting practices.

Company T
Company T, founded in 1996, is a leading custom air cargo carrier offering a full range of services for
express shipping with an average annual turnover of MYR 700 million. In May 2007 the company’s shares
saw a massive sell-down following the announcement of findings from a special audit conducted pursuant to
the alleged unreliability, discovered by the company’s newly appointed auditor, of its consolidated results for
the financial year ending December 31, 2006. The special audit found that the company’s revenue for 2005
and 2006 had been overstated by more than MYR 500 million through recognition of revenue that had yet to
crystallize.
The overstatement of revenue for the financial year ending December 31, 2005, involved the recording
of invoices issued for purported services to 19 companies totalling MYR 197 million. In the financial year
ending December 31, 2006, the same modus operandi had been applied, resulting in the false recording
of 20 invoices totalling MYR 333 million. This misreporting represented overstatements of 36% and
30%, respectively, of the company’s consolidated revenues for the years ending 2005 and 2006 and
changed what would otherwise have been pretax losses into pretax profits. A further audit extended back
to the financial year ending December 31, 2004, showed a similar modus operandi that resulted in an
overstatement of revenue by approximately MYR 95 million. However, the findings for that financial year
could not be fully substantiated as the documentation needed for further testing had not been completed.
This saga led the SCM to charge three executives of Company T, including its founder, with misreporting of
financial information.
This case shows that creative accounting practices can extend back many years before they are detected.
Many questions have arisen as to why the previous auditor failed to bring the issue to light during the
normal course of auditing the financial statements for the years ending 2005 and 2006. Provided that the
audits were conducted with due care and consideration and all relevant audit procedures were undertaken,
the auditor should have discovered frauds of that magnitude. Nevertheless, this did not happen and
stakeholders had to wait for the newly appointed auditor to spot that something was wrong with the
company’s financial statements.
Some creative accounting practices may represent a fine line between manipulative finessing and fraud that
would be difficult to distinguish. As the case of Company T illustrates, premature recognition of income from
purported sales that involve significant amounts is too obvious an indicator to go unnoticed for several years.
It is very perplexing to ponder on the possibility that the auditor was not able to spot even a trace of such
indications of malpractice. Sometimes more palpable creative accounting practices are employed, but still
auditors fail to detect them, as is shown by the next case.

Company M
Company M used to be the largest manufacturer of optical data storage media in South East Asia.
Founded in 1994, the company’s ability to cater to its clients’ specific needs and its reputation as a reliable
manufacturer garnered it a prominent base of global clients. Nevertheless, in 2007 things took a different
turn for the company. About a year before that, in June 2006, the company had talked about a “sterling
fourth quarter” for its financial year ending April 2006. However, in April 2007 the company announced that
two of its major subsidiaries had defaulted on maturing trade facilities.
A preliminary investigation report highlighted “substantial irregularities” in the subsidiaries’ financial
statements, including fictitious trade creditors and debtors, undisclosed related party transactions, and a
deposit payment of MYR 211 million for production lines that appeared to be fictitious. The investigation also

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uncovered misstatements of inventories arising from closing stock balances being inflated by as much as
MYR 100 million. The other major fraud was the amount of trade receivables as a result of fictitious trade
debtors, which had been booked as MYR 334 million. Based on the investigation’s findings, it was concluded
that the misstatements in the company’s financial statements had been going on and had accumulated over
a number of years. Misstatements of the revenues and cost of sales dated back to at least the financial year
ending April 2005. Misstatements in the balance sheet that included inventories, trade receivables, and
prepayments also went back as far as the financial year ending April 2005.
Soon after the investigation report was released in December 2007, the SCM charged the company’s former
financial controller and the executive chairman with making false statements. The SCM also obtained an
arrest warrant against the company’s executive director. The company was unable to sort out its financial
woes, which was not surprising considering that a large chunk of its past revenues had been falsified. It
failed to submit a regularization plan to the authorities and was delisted in April 2008. It has since been
declared bankrupt.
As with Company T, this case was another shock to the Malaysian corporate community. The public too is
awed at how far companies can manipulate financial figures to make their performance look good. Some
of the creative accounting practices employed are so obvious but yet so deceptive, and the companies
we have looked at may have gone the extra mile to meticulously cover up their tracks. Putting the issue of
auditor independence aside, companies appear to know the tricks of fooling auditors, and some have done
so successfully as our two case studies show.
It is daunting that frauds of this scale went undetected for several years despite the fact that auditors went
through the financial statements. Performed with reasonable care, the audits should have flagged that things
might not be all they were claimed to be in such financial statements. This makes us wonder how companies
that have creatively manipulated their financial statements to this extent could have deceived the auditors.
Another question of equal importance is whether the auditors are doing their work properly.

Detecting Creative Accounting Practices—What Can Be Expected of

Auditors?
An audit conducted in accordance with International Standards on Auditing (ISAs) is designed to provide
reasonable assurance that the financial statements taken as a whole are free from material misstatements.
Although the ultimate responsibility for the prevention and detection of fraud and error rests with those
charged with governance, auditors can still be held liable in the event that financial statements are misstated.
However, when we take into account that auditors have to work within limitations, it would be extremely
costly, and probably impossible, for them to find all the misstatements in a financial report. The limitations
faced by auditors—the inherent limitations of internal controls, the fact that only sample testing can be
done, time and cost factors, and the limitations of human resources—however, do not release them
from the responsibility of uncovering material misstatements that would adversely affect the interests or
decisions of the users of a financial statement. If we view creative accounting as a practice that may lead
to actual misrepresentation and falsification in the financial statements, it is clear that auditors should equip
themselves with the appropriate principles, techniques, and tools to detect such practices, as shown in
Figure 5.

Figure 5. Auditors and the detection of creative accounting practices

The principles of professional scepticism and due professional care are the two most important conventions
that auditors should uphold. ISA 200 requires that an audit be designed to provide reasonable assurance
of detecting both material errors and fraud in financial statements, and this obviously has relevance to
creative accounting practices. In accomplishing this objective, the audit must be planned and performed
with an attitude of professional scepticism. Professional scepticism is an attitude that includes a questioning
mind and critical assessment of the audit evidence. The auditor should not accept every management
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assertion at face value; in saying that, he or she should not assume that management is dishonest, but
the possibility of dishonesty must be considered. The due professional care principle requires the auditor
to apply the care and skills expected of reasonably prudent and competent auditors. It concerns what the
auditors do and how well do they do it. Auditors must possess the level of skills commonly possessed by
other auditors and they must exercise these skills with reasonable care and diligence. If after conducting
the audit with professional scepticism and due professional care an auditor still cannot detect unwarranted
creative accounting practices, then the auditor has satisfied him or herself that they have done everything
within their means to assert the accuracy of the financial report. The auditor’s approach should be: trust—but
verify!
“Although the ultimate responsibility for the prevention and detection of fraud and error rests with those
charged with governance, auditors can still be held liable in the event that financial statements are
misstated.”
Auditors are expected to have knowledge of suitable techniques and tools that enable the effective detection
of creative accounting practices. The creative accounting checklist we have presented here is one tool that
can be used by auditors to enhance their ability to detect these practices. Nevertheless, auditors should bear
in mind that the checklist will not be able to provide a conclusive finding. It is just a tool to enable them to
reach a more informed conclusion on whether or not financial statements may have been creatively altered.
Apart from the creative accounting checklist, auditors can explore many computer-assisted tools that offer
a wide variety of applications. These tools, such as fraud detector (Cerullo and Cerullo, 2006), can examine
data faster and more accurately and generate reports on exceptional or unusual items in the financial
statements. Auditors are also expected to have an understanding of the most common forms, indicators, and
warning signs—better known as red flags—of creative accounting practices that could indicate fraud. The
red flags may not be indicators in themselves, but taken together collectively they may indicate an increased
motivation to commit fraud.
Audit risk represents the risk that auditors will opine that financial statements are fairly stated and an
unqualified opinion can be issued when in fact they contain material misstatements. Audit risk will be high in
the event that auditors fail to exercise due professional care in detecting creative accounting practices that
eventually prove to be fraudulent. Faced with high audit risk, auditors are exposed to legal consequences
that could be instigated by clients, shareholders, or third parties such as creditors (Figure 6).

Figure 6. Auditors’ legal relationships

As shown in Figure 6, auditors are expected not only to serve the client but also to meet their responsibilities
and duty of care to shareholders and third parties. Hence, in the event that there is a breach of duty of care,
these shareholders and stakeholders may sue the auditors for negligence. Thus, in minimizing the legal risk,
auditors should exercise due professional care and embrace professional scepticism in their work.
“Financial manipulation at many times could be rewarding favourably to the companies which include
improved share price, debt ratings, interest costs, restrictions from debt covenants, and profits.”

Summary
There are many methods that management can use to cover up poor financial performance or to boost the
company’s earnings. These practices may be both within and beyond the boundaries of Generally Accepted
Accounting Principles (GAAP). The methods include switching between different accounting methods;
exploiting subjective estimations of certain financial numbers; the creation of artificial transactions; the
complexity of business transactions and corporate structure; and the manipulation of income recognition

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across different time periods. Such practices may be difficult to detect, and sometimes it is hard to
distinguish between legal and illegal practices.
Companies have many reasons to turn a blind eye to manipulation by management with regards to financial
reporting. Financial manipulation can create improvements in share price, debt ratings, interest costs,
restrictions from debt covenants, and profits. The rewards for those people involved in preparing the financial
numbers can be lucrative as well, especially if management compensation packages are based on financial
performance. Hence, auditors should be careful to examine management compensation packages that are
based on financial performance to ensure that the latter is reported truly and accurately.
In conducting an audit, auditors should bear in mind the following points.
Creative accounting practices may often be tantamount to misleading the users of financial statements, and
auditors should always be alert to the possibility that they amount to actual fraud.
Creative accounting practices that may indicate the presence of fraud are more worrying than accounting
errors.
Auditors need to increase their vigilance in conducting audits, especially if the indicators of creativity raise
suspicions that the purpose may be to fraudulently manipulate the accounts.
Detecting creative accounting practices is not an easy task, but auditors should not pass on their
responsibilities to others.
If the task of detecting creative accounting using normal audit procedures is too difficult, auditors should
consider seeking other methods to detect such practices.
Understanding the issue of creative accounting will help auditors to ensure a high quality of financial
reporting and to maximize returns to stakeholders.

More Info
Books:
• Albrecht, W. Steve, Conan C. Albrecht, Chad O. Albrecht, and Mark Zimbelman. Fraud Examination.
3rd ed. Mason, OH: South-Western Cengage Learning, 2009.
• Coffee, John C., Jr. Gatekeeper Failure and Reform: The Challenge of Fashioning Relevant Reforms.
Oxford: Oxford University Press, 2006.
• Mulford, Charles W., and Eugene E. Comiskey. The Financial Numbers Game: Detecting Creative
Accounting Practices. Hoboken: NJ: Wiley, 2002.

Articles:
• Amat, Oriol, Jordi Perramon, and Catherine Gowthorpe. “Manipulation of earnings reports in
Spain: Some evidence.” Journal of Applied Accounting Research 8:3 (2007): 93–115. Online at:
dx.doi.org/10.1108/96754260880001055
• Beatty, Anne, and Joseph Weber. “The effects of debt contracting on voluntary accounting method
changes.” Accounting Review 78:1 (January 2003): 119–142. Online at: dx.doi.org/10.2308/
accr.2003.78.1.119
• Cerullo, Michel J., and M Virginia Cerullo. “Using neural network software as a forensic accounting
tool.” Information Systems Control Journal 2 (2006). Online at: tinyurl.com/8xkvufc
• Healy, Paul. M., and James. M. Wahlen. “A review of earnings management literature and its
implications for standard setting.” Accounting Horizons 13:4 (December 1999): 365–383. Online at:
dx.doi.org/10.2308/acch.1999.13.4.365
• Kothari, S. P., Andrew J. Leone, and Charles. E. Wasley. “Performance matched discretionary
accrual measures.” Journal of Accounting and Economics 39:1 (February 2005): 163–197. Online at:
dx.doi.org/10.1016/j.jacceco.2004.11.002

Reports:
• Beasley, Mark S., Joseph V. Carcello, Dana R. Hermanson, and Terry L. Neal. “Fraudulent financial
reporting: 1987–1997: An analysis of US public companies.” Committee of Sponsoring Organizations
of the Treadway Commission (COSO), 1999. Online at: tinyurl.com/7l4ogtf

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 • International Federation of Accountants (IFAC). “International Standard on Auditing 200 (ISA
200): Overall objectives of the independent auditor and the conduct of an audit in accordance with
international standards on auditing.” IFAC. Online at: tinyurl.com/6pz48a9

Websites:
• Bursa Malaysia Berhad: www.bursamalaysia.com/website/bm
• International Federation of Accountants (IFAC): www.ifac.org

See Also
Best Practice
• Fraud: Minimizing the Impact on Corporate Image
Viewpoints
• Freezing Out Fraud
Checklists
• Internal Auditing for Fraud Detection and Prevention

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