What is aggressive accounting?

Aggressive accounting is a business practice in which some incorrectness is carried out on balance sheets and financial information to make the company economically stable. Some tactics used in aggressive accounting are explicitly illegal, while other skirts boundaries that are legal in the technical sense, but certainly do not apply to the spirit of traditional accounting procedures. Aggressive accounting was also known as "creative" or "innovative" accounting for centuries, but in the 20th century it became particularly problematic when it contributed to a number of financial scandals.

The aim of accounting is to create a complete picture of the company's finance and monitor these finances effectively and honestly. However, there are a number of ways to manipulate accounting data that obscure financial problems or artificially inflate the value of the company. The practice of aggressive accounting, also known as "booking books," includes some machinations that represent the desired financial picture.

There are several goals for aggressive accounting. One of them is to inflate the value of the company's shares, which generates more operating capital. Companies may justify the use of aggressive accounting with the argument that it creates more capital, which allows the company to expand and strengthen, and that accounting is simply optimistic, rather than a direct lie. Aggressive accounting is also used to mollify shareholders and can be used specifically to cheat on people in the case of a company that increases the price of shares with aggressive accounting than to sell their shares quietly to selected individuals.

It may be difficult to detect aggressive accounting. Shareholders usually receive annual or regular statements about the company's income, expenditure and overall performance of the company, but Tyho, I do not have access to the books of the company that can reveal interesting information when audited. FinanciallyTiři can also be limited to the amount of audit they can perform, which means that creative accounting can only be identified when the whistleblower comes.

This practice is considered harmful because it can inflate financial markets and expose them to the risk of collapse. This also harms individuals who can be a victim when they invest in companies with aggressive accounting practices, and can also bypass the entire industry. Many nations try to regulate accounting procedures so that it is more difficult to engage in creative accounting and fines for cooking books can include fines and prison time for participants.