Creative accounting is the process of selecting accounting methods to create reports that provide results desired by preparers, and it occurs because managers will work for their own interests, according to PAT. Therefore, the best choice is E. Choices A, B, C, and D are incorrect because they do not fully and accurately describe creative accounting.

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Creative Accounting

Question 37

Multiple Choice

Creative Accounting:

A) Is a term used by the media to describe the process of selecting accounting methods when creating reports that provide results desired by preparers.
B) Occurs, according to PAT, because managers will work for their own interests.
C) Is easy for Auditors to identify.
D) Occurs when account preparers choose not to follow accounting standards to best reflect the performance of the firm.
E) Is a term used by the media to describe the process of selecting accounting methods when creating reports that provide results desired by preparers and occurs, according to PAT, because managers will work for their own interests.

Correct Answer: