Creative Accounting Effect through Discretionary Accruals on Likelihood of Economic Unit Being Exposed to Financial Distress Risks

Abstract

Many major international companies were subjected to financial faltering and then bankruptcy and collapse as a result of their managements misusing this flexibility in accounting principles and policies, which led to most economic units losing public confidence and increasing doubt about the efficiency and integrity of their management in the extent of adherence to accounting policies and standards. This type of practice is called creative accounting, which means taking advantage of the flexibility that exists in the use of accounting principles and policies, or the lack of consistency in their use from year to year, with the intention of influencing the numbers appearing in the financial statements and thus influencing the outcome of the activity and the financial position of the economic unit to achieve its goals and motives of maximizing profits. current and future financial situation or improve through manipulation to deceive shareholders and users of financial information. Hence the importance of the research through knowing the impact of creative accounting through optional entitlements on the possibility of economic units being exposed to financial default, as the concept of creative accounting will be exposed, the reasons for economic units resorting to it, its types and objectives, the concept of optional entitlements and the types of those entitlements, as well as the concept of financial default and its types. Its causes and stages, Then the applied aspect of the research will be presented by displaying the results of the questionnaire that were distributed to the research sample represented by a group of chartered accountants and containing  a set of questions in three axes. The results of those answers were presented through the (SPSS) program and through the use of simple linear regression for the purpose of achieving the hypothesis. The research is based on (there is a statistically significant effect of creative accounting through optional entitlements on the exposure of the economic unit to financial distress), and then the most important results reached by the researcher and the most important recommendations were presented.