Accounting Manipulation and Its Effects in the Financial Statements of Albanian Entities

Abstract

Financial information manipulation is a distorted presentation, a misstatement of the financial position/performance, creating a false impression of an organization's financial strength. It is known as: revenue management, income smoothing, creative accounting practices, aggressive accounting or accounting manipulation but the essence is the same. It creates a very large asymmetry of information for readers of financial statements that affect decision making. The purpose of this paper is to present causes and consequences of accounting manipulations. We have also made an observation of techniques and methods of accounting manipulations and its application especially in Albanian entity's financial statements. Creative Accounting or "window dressing" techniques have been applied widely and are well known worldwide. During the period of the global financial crisis the effects of accounting manipulation were fundamental. A large number of companies (with an immense impact on the economy of their countries) that went bankrupt had applied creative accounting. On the other hand we consider the impact that accounting manipulation has given to other parties with which the firm is involved in relationships. In the conclusions of the paper we will perceive differences/similarities in the reasons of manipulating between entities operating in developing countries (Albania case) and entities operating in developed countries.