Creative Accounting Practices and Their Perceived and Actual Impact on Financial Reporting: Evidence from Romanian Listed Companies

Abstract

This study investigates creative accounting practices and their effects on reported financial position, performance, and risk indicators in Romanian listed companies. Using a mixed research design, the analysis combines a perception-based survey of financial–accounting professionals with a scenario-based financial case study, allowing for a comparison between perceived and actual effects of discretionary accounting techniques. The survey results indicate that professionals perceive creative accounting practices as having a significant influence on financial reporting outcomes, particularly in areas characterized by high managerial discretion, such as provisions, depreciation policies, inventory valuation methods, asset revaluation, and capitalization of research and development expenditures. The empirical case study confirms that these techniques generate observable changes in key financial indicators; however, the magnitude and direction of their effects vary across accounting methods and reporting periods. A key contribution of this study lies in highlighting a discrepancy between perceived and measured effects of creative accounting. While practitioners accurately identify the accounting areas most exposed to discretion, the empirical results suggest that the financial impact of creative accounting practices is often more moderate and context-dependent than commonly assumed. In addition, a descriptive assessment of fraud risk indicators suggests that extensive use of discretionary accounting practices may be associated with elevated risk exposure, without constituting direct evidence of fraudulent behavior.