CREATIVE ACCOUNTING PRACTICES BY COMPANIES LISTED ON THE KUWAIT STOCK EXCHANGE (KSE)

Abstract

This research endeavours to investigate diverse dimensions of creative accounting (CA) practices deployed by entities listed on the Kuwait Stock Exchange (KSE). In pursuit of this aim, a questionnaire was manually disseminated to auditors affiliated with prominent "big-four" audit firms, local audit entities, and audit companies listed on the KSE. Analysis of the questionnaire responses unveiled that the utilization of CA techniques by KSE-listed entities conforms to legal frameworks. Primarily, these techniques are wielded to engender investor interest in financial markets, align with extant investor anticipations, and entice potential investors. Notably, CA practices manifest predominantly through manipulations of accounting measurements and disclosures, exerting principal influence on the balance sheet. Sectors such as oil and gas, telecommunications, and manufacturing exhibit heightened propensity for employing CA methodologies. Commonly employed CA techniques among KSE-listed entities encompass off-balance sheet financing, capitalization of interest costs, proliferation of accounting policies and treatments, pre-acquisition write-downs, and capitalization of research and development (R&D) expenses. Mitigation of CA practices can be effectuated through the implementation of stringent internal audit mechanisms, adherence to unified bookkeeping and accounting systems, cultivation of an ethical organizational milieu, and enforcement of rigorous accounting standards.