A study on the incentives influencing the practice of creative accounting in selected business establishments in Davao City

• Main Author: Padayogdog, Christie R.
• Format: text
• Language: English
• Published: Animo Repository 2003
• Subjects: Earnings management; Accounting
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3125; https://animorepository.dlsu.edu.ph/context/etd_masteral/article/9963/viewcontent/CDTG003598_Fedited.pdf
• Institution: De La Salle University

This study is primarily based on the premise that the quality of reported financial statement information depends on the incentives faced by managers when preparing them. While previous studies identified varying incentives to the practice of creative accounting, it is not clear which incentives actually influence the practice of creative accounting in the Philippines particularly in Davao City. This therefore provides a rare opportunity to study the interaction between creative accounting and the underlying incentives. This study did not only prove the widespread use of creative accounting practices as observed by auditors in Davao City but that it also unveils that the most influencing incentive to its increasing practice is for companies to either Reduce taxes or Obtain bank loans. And that the most frequent creative accounting practice for conservative centers on Expensing rather than capitalizing costs and that the reverse is true for aggressive i.e., Capitalizing rather than expensing costs. Results of the Multiple Linear Regression Analyses reveal that only the incentives Related party transactions and Increased volatility in market-related elements, interest, inflation, and exchange rates will significantly influence the practice of conservative creative accounting in Davao City and that only the incentives Related party transactions and Increased volatility in market-related elements, interest, inflation, and exchange rates will significantly influence the practice of aggressive creative accounting in Davao City.