Question:

Discuss about the Effect of Creative Accounting on shareholders wealth.

Answer:

Step 1

Project Plan

Statement of detailing about the field of research and explain the relevance to the field of research for the profession

The project plan is based on specific field of research and this field is accounting. The student aim at becoming future professional accountant and this is one of the vital reasons why this project plan topic is based from accounting field (Aca & Igbeng, 2014). During the course from present University, the student had been given an assignment where they have to research on a topic of interest so that they have both theoretical and practical knowledge and this will help them to great extent in the upcoming years. The role of professional accountant is to summarize current financial statement and this is done by collecting information, preparation of balance sheet, projections of profit and loss statement and several other reports (Yadav, Kumar & Bhatia, 2014). These professional accountants look at the financial transactions by auditing the documents in fair manner.

Source of secondary data linked to the selected field of research

The researcher will be collecting secondary data for getting access to the information that relates with the research topic on effect of creative accounting on shareholders wealth (Del Brio, Lopes-e-Silva & Perote, 2016).

Research Questions

1. What is the relationship present between creative accounting and shareholders wealth?
2. Does creative accounting practice affect investment decisions taken by shareholders?
3. How far does well-designed framework of accounting regulation can limit creative accounting practice especially in corporate financial accounting?
4. How far creative accounting effect upon share prices of any business enterprise and dividends of the shareholders.

Searching terms in Google Scholar

            The searching term that should be typed in Google Scholar will be Creative Accounting, Shareholders wealth and relationship that exist between these two variables (creative accounting and shareholders wealth) (Del Brio, Lopes-e-Silva & Perote, 2016).

Peer-reviewed journal articles

            There are three peer-reviewed journal articles that are being searched in Google Scholar helped the researcher to gain insights of information about the research topic (Effect of Creative Accounting on shareholders wealth).

All the three peer-reviewed journal articles need to be summarized in the literature review section to give insights of information about concept of creative accounting and use of various tools (Yadav, Kumar & Bhatia, 2014).

Step 2

Project Proposal

In addition, the study had been conducted by the research and this will eventually help policy makers, auditors, management of different business enterprise as well as student researchers (Del Brio, Lopes-e-Silva & Perote, 2016). The current segment even helps manager to have proper understanding about the effects as well as costs of window dressing financial statement. The present research plan will even assist investors as well as shareholders and public who in real may resort to audited financial state of business enterprise in order to take decision relating to investment activities. These decisions will be available for academic consumption as well (Yadav, Kumar & Bhatia, 2014). The creative accounting practices are treated and attributed to bad corporate governance. Furthermore, the accountants should apply strategies that enhance creative accounting by making use of profit eroding mechanisms and this lead to drastic consequences. Many companies are involved on over reporting their financial performance for meeting targets as well as pleasing the shareholders demand. The researcher aims at highlighting the existence of creative accounting. By this study, it is understood that there are several methods that can be used for influencing shareholders wealth as a way to attract future investment (Zhang, 2016).

Preliminary literature review

            As rightly put forward by Won Kim & Matsumura (2017), both accounting process and selection of policies results from various judgments and it is capable of getting manipulative results that further means creative accounting. There are several differences that can be understood in financial reporting, it is legitimately prepared from selection of varied accounting policies from same business enterprise for particular period, and this altogether had brought challenges in understanding the credibility of accounting practices (Del Brio, Lopes-e-Silva & Perote, 2016).

According to Jiang & Zhang (2017), both creative accounting as well as earning management are used for understanding the accounting practices that tends in manipulating the rules of accounting practices or spirit of those values. In addition, these values are categorized by dubious complications as well as usage of novel ways to present entries of income, assets and liabilities.

As opined by Rani, Yadav & Jain (2015), there are many reports present that highlight price manipulation as well as overstatement of profit figures and falsification of accounts that has some dubious stewards those results in ineffective financial reporting system. By referring to past business or corporate failures, it is understood that there is close association with corporate government failures as it takes into account a number of parties, auditors, investors as well as management Board of Directors (Del Brio, Lopes-e-Silva & Perote, 2016).

Joshi & Li (2016) argues that most of the business enterprise have been linked with fraudulent activities as well as largely affected by financial collapses. On analysis, it is noted that most of the standards that are being set for the audit or accounting have been eroded. Some of the famous accounting scandals such as Enron, Parmalat, World Com and Tyco where these scandals have cost billions of dollars and even damaged the accounting profession that result in financial misstated figures

To explain the concept in detail, it is understood that the current business environment as well as more economic recession recently had pushed the top management authority of most of the organization to pay attention on how to make the financial statements of their company so that it look better and able to attract the investors (Yadav, Kumar & Bhatia, 2014). By using creative accounting practices, the company manipulates figures in their financial statements either they increase or decrease the numbers and it entirely depends upon what the company need to achieve at that particular point of time. Fraud nowadays had become one of the major threats for business organizations (Del Brio, Lopes-e-Silva & Perote, 2016). Fraud is treated as big risk that incurs a very big cost that results in several other problems where stakeholders lose confidence and interest. In addition, the researcher finds out the issues and makes an effort to come with a solution to financial statement fraud. Furthermore, the particular research work will focus upon involvement of auditor in solving creative accounting problems. Therefore, the researcher tries to focus upon corporate government and uses as a tool that will help in fraud detection as well as prevention at the same time (Ozuomba, Anichebe & Okoye, 2016).

Research Aim

            The main aim of the project proposal is to elucidate the effect of creative accounting on shareholders wealth. In order to reach the above aim of this project proposal, the researcher need to set some objectives and these are mentioned below with proper justification:

Research Questions

1. What is the relationship present between creative accounting and shareholders wealth?
2. Does creative accounting practice affect investment decisions taken by shareholders?
3. How far does well-designed framework of accounting regulation can limit creative accounting practice especially in corporate financial accounting?
4. How far creative accounting effect upon share prices of any business enterprise and dividends of the shareholders.

Research Plan

Overview of proposed methods of data collection and data analysis

            As far as research philosophy is concerned, the researcher will be selecting interpretivism research philosophy, as they will be collecting secondary sources of information for this research study on effect of creative accounting on shareholders wealth. Other two-research philosophy (Positivism and Realism) is not possible as it deals with primary data collection (Richard & Yekini, 2014).

As far as research approach is concerned, the researcher will be selecting deductive approach as they will be collecting secondary sources of information for this research study on effect of creative accounting on shareholders wealth. Inductive research approach in this case is not applicable, as the researcher had not found out any new or innovative theory (Gitman, Juchau & Flanagan, 2015). Rather, the researcher will be analyzing the existing published journal articles that explain about the research topic and then deciding the conclusions at the end.

For this present study, the researcher will be using secondary data and the data had been collected from valid and reliable sources such as peer-reviewed journal articles, academic books and websites (Giannopoulos, Khansalar & Neel, 2017).

There are two types of data that need to be evaluated by the researcher where they have to decide which to select and which data to reject to get the best results or outcome from the research study (Yadav, Kumar & Bhatia, 2014). The two types of data are inclusive data and exclusive data. The researcher rejects exclusive data as these data or information is published before 2012 and this means that the information is quite outdated and lacks recent news. In this case, the researcher uses inclusive data as these data or information is published after 2013 and this means that the information is current and updated. For this purpose, the researcher had reviewed 10 published journal articles that align with the research topic on effect of creative accounting on shareholders wealth (Del Brio, Lopes-e-Silva & Perote, 2016).

The researcher will be conducting thematic analysis where the objectives of the research study will be given key themes and then explained and analyzed at the end (Yadav, Kumar & Bhatia, 2014). In this study, the researcher will be giving proper emphasis on attributes that connects or explains about creative accounting as it effect on shareholders wealth. Entire study had been analyzed based on the key themes that properly align with the key objectives and understanding on how far accounting fraud can be prevented by business organization. The main aim of the researcher to find a tool that is helpful to reduce accounting fraud and then applied where the fraud can be prevented to larger extent (Balaciu et al., 2014).

Gantt chart schedule

Limitations of the study

The researcher had limited time allocated to conduct the present research study and carried out the research study under tight schedule and this prevented the researcher to conduct in-depth analysis (Amel-Zadeh, Meeks & Meeks, 2016). There was problem to get relevant published journal articles that relates with the research topic that was decided by the researcher.

Reference List

Aca, O. K. J., & Igbeng, M. E. I. (2014). Corporate Governance, Shareholders Wealth Maximization and Tax Avoidance. Corporate Governance, 5(2).

Amel-Zadeh, A., Meeks, G., & Meeks, J. G. (2016). Historical perspectives on accounting for M&A. Accounting and Business Research, 46(5), 501-524.

Balaciu, D. E., Bogdana, V., Feleaga, L., & Popa, A. L. (2014). ” Colorful” approach regarding creative accounting. An introspective study based. Accounting and Management Information Systems, 13(4), 643.

Del Brio, E. B., Lopes-e-Silva, I., & Perote, J. (2016). Effects of opportunistic behaviors on security markets: an experimental approach to insider trading and earnings management. Economia Politica, 33(3), 379-402.

Giannopoulos, G., Khansalar, E., & Neel, P. (2017). The Impact of Single and Multiple Mergers and Acquisitions on Shareholders’ Wealth of UK Bidder Firms. International Journal of Economics and Finance, 9(3), 141.

Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.

Jiang, W., & Zhang, X. (2017). Effects of Corporate Governance on Accounting Education and Enterprise Value in High-Tech Industry. Eurasia Journal of Mathematics, Science and Technology Education, 14(3), 915-922.

Joshi, S., & Li, Y. (2016). What Is Corporate Sustainability and How Do Firms Practice It? A Management Accounting Research Perspective. Journal of Management Accounting Research, 28(2), 1-11.

Ozuomba, C. N., Anichebe, A. S., & Okoye, P. V. C. (2016). The effect of dividend policies on wealth maximization–a study of some selected plcs. Cogent Business & Management, 3(1), 1226457.

Rani, N., Yadav, S. S., & Jain, P. K. (2015). Impact of Mergers and Acquisitions on Shareholders’ Wealth in the Short Run: An Event Study Approach. Vikalpa, 40(3), 293-312.

Richard, A. K., & Yekini, L. S. (2014). The Impact of Mergers and Acquisitions on Shareholders’ Wealth: Evidence from Nigeria. Arts, Social Sciences, 54.

Won Kim, N. K., & Matsumura, E. M. (2017). Managerial accounting research in corporate social responsibility: A framework and opportunities for research. In Advances in Management Accounting (pp. 31-58). Emerald Publishing Limited.

Yadav, B., Kumar, A., & Bhatia, B. S. (2014). Concept of creative accounting and its different tools. International Journal of Management and Social Sciences Research (IJMSSR), 3(2), 66-74.

Zhang, L. (2016). A Summary of Literature: Convertible Bond Issue Announcement Effect. American Journal of Industrial and Business Management, 6(02), 83.