Big bath as a determinant of creative accounting in small and micro enterprises

1779 ACTA UNIVERSITATIS AGRICULTURAE ET SILVICULTURAE MENDELIANAE BRUNENSIS Volume 63 194 Numbe 5, 2015 h p://dx.doi.o g/10.11118/ac aun201563051779 BIG BATH AS A DETERMINANT OF CREATIVE ACCOUNTING IN SMALL AND MICRO ENTERPRISES Lenka Zemánko á1 1 Facul y o Business and Managemen , B no Uni e si y o Technology, An onínská 548/1, 601 90 B no, Czech Republic Abs ac ZEMÁNKOVÁ LENKA. 2015. Big Ba h as a De e minan o C ea i e Accoun ing in Small and Mic o En e p ises. Ac a Uni e si a is Ag icul u ae e Sil icul u ae Mendelianae B unensis, 63(5): 1779–1785. C ea i e accoun ing is a 21s cen u y phenomenon and in he con ex o he economic c isis and defi ci budge i has been ecei ing inc easing a en ion, in pa icula in he a ea o p e en ion and de ec ion o accoun ing manipula ion. The ocus o he esea ch on small and mic o-en e p ises s ems om li le a en ion paid o hese en e p ises and he undeniable impo ance o small and mic o-en e p ises o he economy. P ima y esea ch is based on he examina ion o a phenomenological pa adigm, i.e. i ocuses on unde s anding human beha iou on he basis o a e e ence amewo k o esea ch pa icipan s. The main esea ch me hod used in esea ch is a compa a i e case s udy, which is one o ew me hods ha allow esea ch o his sensi i e opic. Resea ch will ocus on he exis ence o a big ba h in he company’s a io o p ofi and u no e as a de e minan o a change in he company’s app oach o c ea i e accoun ing. Keywo ds: c ea i e accoun ing, audulen accoun ing, ea nings managemen , ba h in accoun ing INTRODUCTION C ea i e accoun ing is o en associa ed wi h he 21s cen u y’s economy and o se e al yea s i has been discussed in he media i ually e e y day. Following he end se by he media, c ea i e accoun ing has become inc easingly mo e o en he subjec o esea ch s udies and scien ifi c publica ions. A e media exposu e o a se ies o accoun ing scandals, he concep o c ea i e accoun ing has gained a new dimension, which caused he ocus o esea ch in pa icula on la ge en e p ises and he public adminis a ion. In he con ex o he economic c isis and defi ci budge , he issue o c ea i e accoun ing is, in pa icula in e ms o p e en ion and de ec ion o accoun ing manipula ion, an issue in ocus. Small and mic o-en e p ises canno emain unde - esea ched due o hei undeniable impo ance o he economy. Raising awa eness o he issue o c ea i e accoun ing and he imp o emen o accoun ing manipula ion de ec ion is one o he ways o fi gh agains c ea i e accoun ing. Theo e ical Backg ound The concep o c ea i e accoun ing can be unde s ood, in acco dance wi h he defi ni ions by Nase in 1993, K upo á in 2001, O’Regan in 2004 and Tumpach in 2008, as a misuse o accoun ing me hods and use o accoun ing manipula ions a he en e p ise le el in o de o in l uence he i nancial s a emen s so ha hey p o ide hei use s wi h dis o ed in o ma ion abou he en e p ise. In acco dance wi h he defi ni ions o he e m in mo e ecen publica ions, c ea i e accoun ing includes ope a ions wi hin he limi s o law as well ope a ions ou side he law, i.e. audulen ones. The eason o no excluding audulen ope a ions is also he diffi cul y p o p o e he in en ion o manipula e wi h accoun ing da a. A numbe o esea ch s udies he e o e concen a e on accoun ing auds as one o he wo s ac i i ies in he a ea o c ea i e accoun ing. Eff ec s o C ea i e Accoun ing The eff ec s o c ea i e accoun ing, as epo ed in he published li e a u e, can be di ided in o in p inciple posi i e ones and nega i e ones. 1780 Lenka Zemánko á The posi i e eff ec s o c ea i e accoun ing include enhanced abili y o ex e nal use s o fi nancial s a emen s o p edic he u u e o he company (Roden and Sadan, 1980), o inc eased in o ma ion alue o he epo ed p ofi s and he pe cep ion o he en e p ise as less isky in he case o he use o c ea i e accoun ing (Wang and Williams, 1994), o inc eased sus ainabili y and p edic abili y o e enue (Sub amanyam, 1996). A posi i e eff ec can also be conside ed educed cos o bo owed capi al and imp o emen o condi ions o ob aining addi ional capi al (Ama e al., 2000). En e p ises may also see he con usion o compe i o s by alse da a as a posi i e eff ec . Examples o au ho s who belie e ha he infl uence o c ea i e accoun ing on he ma ke is insignifi can include Imhoff (1977) o Healy and Wahlen (1999). Howe e , posi i e and neu al app oaches o au ho s o c ea i e accoun ing a e, consequen ly, subjec ed o a gumen s o au ho s who pe cei e c ea i e accoun ing as a nega i e phenomenon. As S olowy and B e on (2004) a gue, i ma ke playe s knew ha he numbe s a e manipula ed, he e would be no eason o hei manipula ion. Manipula ion wi h accoun ing da a, howe e , has a mo e signifi can consequence beyond p o iding manipula ed in o ma ion o company sha eholde s and owne s. E en assuming ha we acknowledge he benefi s specifi cally o hem, c ea i e accoun ing p o ides manipula ed in o ma ion o he whole socie y. These esul s hen aff ec he s a is ics o he en i e coun y and hence GDP and o he indica o s. On a deepe hough , s a is ics da a hen aff ec he alloca ion o esou ces. In an economy whe e alloca ion o esou ces is aff ec ed by in e en ions such as manipula ions wi h accoun ing da a o business uni s, he gene al economic a ge in he o m o effi cien alloca ion o esou ces may be h ea ened. A specifi c pa o c ea i e accoun ing which can al eady be classifi ed as economic c iminal ac i i ies has pa amoun social and economic impac on he in e nal s abili y o he S a e. Besides o he aspec s, i aff ec s he basic e enue componen s o he S a e; i hese a e h ea ened, he long- e m unc ioning o he s a e mechanism is challenged. Fo example, fi nancial analys Smi h (1992) belie es ha he g ea es pa o he economic g ow h o he Uni ed Kingdom in he 1980s can be a ibu ed o c ea i e accoun ing a he han ac ual economic g ow h. As a as nega i e eff ec is conce ned, c ea i e accoun ing may ha e ad e se, o e en liquida ing, consequences o en e p ises ha use i (Smi h, 1992). Indi ec damages ela e o des abiliza ion o us on he fi nancial ma ke s, a decline in he olumes o ading, and a educ ion in he olume o in es men by he en e p ises (Tumpach, 2008). Alb ech ’s (2006) conclusions s a e ha a e he manipula ion wi h accoun ing da a o En on was published, he decline in ading caused by a loss o in es o s’ us was e en highe han he decline caused by he e o is a acks in Sep embe 2001. The eff ec s o c ea i e accoun ing can he e o e be conside ed o be much g ea e han an o dina y pe son compiling he fi nancial s a emen s ealizes, and c ea i e accoun ing mus be unde s ood pu ely as a nega i e phenomenon wi h ad e se eff ec s on he en e p ise i sel as well as on he socie y as a whole. De ec ion o C ea i e Accoun ing Unde s anding o c ea i e accoun ing in he nega i e sense aises he ques ion o p e en ion and fi gh agains c ea i e accoun ing. The sea ch and he use o ools o de ec c ea i e accoun ing is one o he ways ha can help inc ease he pe cei ed isk o manipula ing accoun ing da a and can aid p e en ion and fi gh agains he phenomenon o c ea i e accoun ing. De ec ion o accoun ing manipula ions is a e y complex p ocess, which is in he cen e o a en ion o a numbe o esea ch s udies. One o he de e minan s o c ea i e accoun ing can be conside ed big ba h accoun ing. In Healy’s iew (1985), big ba h accoun ing ep esen s a pa icula d op in accoun ing da a which p ecedes manipula ion. Healy he e o e unde s ands he big ba h as he cause o c ea i e accoun ing, ollowed by c ea i e accoun ing echniques wi h he aim o elimina e g ea dec eases in fi nancial indica o s. Con e sely, Blake e al. (1995) conside big ba h accoun ing o be a esul o c ea i e accoun ing. They s a om he posi ion ha en e p ises may seek o epo he maximum loss in one yea o be able o epo an imp o emen in fi nancial indica o s in he ollowing yea s. The mos commonly used indica o s in he de ec ion o c ea i e accoun ing a e he company’s p ofi and income. In he USA, he e m ea nings managemen has been commonly used. Ea nings managemen is unde s ood as applica ion o decision-making in he ma e o fi nancial epo ing and s uc u ing o ansac ions wi h he aim o p o ide misleading fi nancial epo s o some s akeholde s so as o infl uence he pe o mance o he en e p ise o u u e ansac ions ha depend on he epo ed esul s (Healy and Wahlen, 1999). Ea nings managemen is he e o e based on in o ma ion asymme y, which occu s be ween he p i ileged managemen and mo e dis an s akeholde s (Schippe , 1989). Con empo a y li e a u e desc ibes wo basic objec i es o ea nings managemen . One o hem is an a emp o epo he bes esul s possible (e.g. Bonne e al., 1998; Healy and Wahlen, 1999; Lynch e al., 2011). Ano he ocus o ea nings managemen desc ibed in he li e a u e is, on he con a y, epo ing o he lowes possible p ofi in an a emp o educe he amoun o he paymen s de i ed om he p ofi (Tumpach, 2008; Ra isanka e al., 2011). The manage s o small and mic o en e p ises ha e diff e en app oach han manage s o big companies. Big Ba h as a De e minan o C ea i e Accoun ing in Small and Mic o En e p ises 1781 Accoun ing is closely connec ed o he axes paymen . In ha sys em small and mic o-en e p ises y o modi y hei axes paymen s downwa ds. In hei esea ch ocused on c ea i e accoun ing, o he au ho s also concen a e on p ofi ; hese conside indica o s based on p ofi o be he mos sui able ones o aud de ec ion (e.g. Bu gs ahle and Diche , 1997; Dechow and Skinne , 2000; Eli zu , 2010; Comunale e al., 2010; Hadani e al., 2011; Ra isanka e al., 2011). Fo example, Ra isanka e al. in hei esea ch used he a io o p ofi ela i e o e enue. O he esea ch s udies in he a ea o c ea i e accoun ing also ocus on indica o s based on income (e. g. Loebbecke e al., 1989; Comunale e al., 2010; Ra isanka e al., 2011). The abo e implies ha one o he app op ia e indica o s o de ec ing c ea i e accoun ing is conside ed o be a io o he company’s p ofi and u no e . In p ac ice, companies ha a e unco e ed a e mos ly hose whose manage s use oo agg essi e echniques and ha e no co ec ly assessed he bounda y be ween ea nings managemen and aud, and clea ly iola ed legal no ms. Gene ally i can be said ha in p ac ice i is diffi cul o iden i y companies ha abuse accoun ing (Dechow and Skinne , 2000). OBJECTIVE AND METHODOLOGY The objec i e o his pape is o e i y he exis ence o a big ba h o a company’s a io o p ofi and u no e in selec ed small and mic o-en e p ises as a de e minan o changes in he app oach o c ea i e accoun ing. Resea ch on he p oblems o c ea i e accoun ing can be conside ed a e y sensi i e opic. I is esea ch o a phenomenological pa adigm, i.e. i ocuses on unde s anding human beha iou on he basis o a e e ence amewo k o esea ch pa icipan s. This app oach emphasizes he subjec i e aspec s o human ac i i y wi h a ocus on meaning a he han on measu ing social phenomena. The ocus on he phenomenological pa adigm in a sensi i e opic like ha o c ea i e accoun ing appea s o be mo e app op ia e because i is no possible o ob ain suffi cien amoun o da a o quan i a i e esea ch so ha hese da a could be ega ded a ep esen a i e sample o en e p ises. Ob aining sui able da a o he examina ion o he issue o c ea i e accoun ing in he Czech Republic is a e y ha d ask due o obliga ions o confi den iali y o offi cials and pe sons in ol ed in he adminis a ion o axes, which ollows om sec ion 52 o he Tax Code. In esea ch ocused analyzing a numbe o cases, he eff ec o he su eyed ma e and he people’s ea o he consequences may lead o a signifi can dis o ion o he ou pu s o he esea ch. The e o e, i was no possible o conduc esea ch using common esea ch me hods such as ques ionnai e su eys. In addi ion, mos companies a e no willing o pa icipa e in such esea ch due o hei ea o he consequences o he esea ch on he con inua ion o he en e p ise’s ac i i y. Phenomenological pa adigm seems o be mo e con enien also due o i s main cha ac e is ics, as lis ed by Collis (2003). I in ol es p oduc ion o a he quali a i e da a (al hough pa ly also quan i a i e), use o a small analyzed sample, ocus o he esea ch on he o ma ion o heo ies wi h low eliabili y bu high alidi y and a emp s o gene alize om one sample o ano he . A numbe o me hods can be used in esea ch on a phenomenological pa adigm. The me hod selec ed as ele an o his esea ch was a case s udy wi h he use o some elemen s o e hnog aphic me hods. As Colis and Hussey (2003) a gue, he me hod o case s udies should be used mainly as a mode n me hod o empi ical esea ch in he esea ch o cu en , no his o ical p oblems, especially in si ua ions whe e he ele an beha iou canno be manipula ed (o only indi ec ly). Yin (2003) claims ha he me hod is sui able i he me hod o in e iews wi h indi iduals in ol ed can be used o da a collec ion. E hnog aphy is a me hod in which he esea che uses hei acqui ed social expe ience o unde s anding human beha iou pa e ns. In many si ua ions, he case s udy me hod helps ecognize o ganiza ional, social, poli ical and ela ed phenomena in indi iduals as well as in g oups. In he las ew yea s hey ha e also been applied o economics. A gene al defi ni ion o case s udy says ha i is an in ensi e s udy o one case, one si ua ion, one pe son o one p oblem, which allows o a e y ho ough and comp ehensi e g asp o he p oblem (Ši oký, 2011). Depending on he manne o applica ion o he me hod, a mul iple compa a i e explana o y case s udy was selec ed because mul iple case s udy is conside ed o be mo e conclusi e han single case s udy. The pu pose o a compa a i e case s udy is o sea ch o simila i ies and diff e ences be ween indi idual cases. Yin (2003) a gues o wo o h ee cases as he ecommended minimum. Simila ly, Miles and Hube man (1994) claim a minimum o wo o ou cases. In case s udies, he selec ion is always delibe a e since i is he only way o ensu e ha he phenomena unde in es iga ion will ha e exac ly he cha ac e is ics ha a e needed o esea ch (Ši oký, 2011). Fou companies ha use c ea i e accoun ing we e selec ed o he esea ch. These companies a e u he in he s udy e e ed o as cases A o D because o he sensi i i y o he da a p o ided. The basic in o ma ion abou he selec ed companies is lis ed in Tab. I. The esea ch is ocused on en e p ises ope a ing in he p i a e sec o , and his is o wo easons. The fi s eason is less p essu e on en e p ises in he p i a e sec o compa ed wi h en e p ises in he public sec o . The second eason is he ac ha he p i a e sec o makes up he majo i y in he p oduc ion o GDP in he Czech Republic. Fo example, in 2011 and 2012, he expendi u es 1782 Lenka Zemánko á o he non-go e nmen al sec o ep esen ed 79% (The Czech S a is ical Offi ce, 2013). The selec ion o en e p ises ocused on small and mic o-en e p ises. In he a ea o de ec ion and p e en ion o c ea i e accoun ing, he ax au ho i y cu en ly ocuses a he on la ge en e p ises due o he signifi cance o possible manipula ion wi h accoun s and, in he con ex o Czech legisla i e amewo k, he subsequen amoun o axes. Small and medium-sized en e p ises do no ecei e much a en ion o he ax adminis a ion and esea ch s udies. The impo ance o small and medium- sized en e p ises o he pe o mance o he s a e economy is undeniable. Acco ding o he s a is ics o The Czech S a is ical Offi ce, in 2011 small and mic o-businesses ep esen ed 99.84% o ac i e business en i ies in he Czech Republic, employed 60.85% o all employees in he business sec o and accoun ed o 54.43% o he added alue (The Czech S a is ical Offi ce, 2013). Mo eo e , a s udy by Hadani e al. (2011) p o es ha he size o an en e p ise has nega i e ela ionship wi h c ea i e accoun ing. The assump ion ha la ge en e p ises use c ea i e accoun ing less o en also s ems om he obliga ion o ha e he fi nancial s a emen s e ifi ed by an audi o , and a g ea e p obabili y o he en e p ise’s ela ions wi h he Chambe o Cha e ed Ce ifi ed Accoun an s and, he e o e, adop ion o i s code o e hics. In he phase o da a collec ion me hod, he in e iew me hod and he me hod o analysis o documen s we e used. In case s udies, he in e iew me hod is one o he main sou ces o in o ma ion (Yin, 2003). As opposed o, o example, ques ionnai e su ey, an in e iew allows he in e iewe o ask mo e complex ques ions and u he de elop hose (Collis, 2003). As a as he o ma o in e iew is conce ned, he in e iews we e mainly pe sonal in e iews wi h con ac pe sons, who we e, in wo cases, he company execu i es and, in wo cases, he company accoun an s. In e ms o s uc u e o ques ions, he in e iews we e non-s anda dized in e iews wi h non-s uc u ed ques ions, as equi ed, acco ding o Collis (2003), by he phenomenological app oach. The analysis o documen s was based on p ofi and loss s a emen s o he su eyed en e p ises o he las ew yea s ha we e p o ided by he con ac pe sons o analysis. The selec ed cases ha e some iden ical o simila cha ac e is ics, such as he legal o m, he numbe o membe s, paid-up egis e ed capi al, and size o he en e p ise. These ensu e he compa abili y o he esul s. A he same ime, he cases show some diff e en cha ac e is ics in e ms o he ime pe iod o he es ablishmen o he company, he line o business, he olume o he cu en u no e o he company, he p ofi and he eeling o being hi by he economic c isis. This allows examining he companies’ diff e ences in hei app oach o c ea i e accoun ing. MAIN RESULTS OF THE RESEARCH On he basis o he documen s analysis, he e olu ion o each company’s p ofi and u no e was iden ifi ed. Based on in e iews wi h he con ac pe sons, in o ma ion was supplemen ed abou he e olu ion o he company’s a i ude o c ea i e accoun ing. Specifi c ques ions we e di ec ed o whe he he company in he cou se o i s exis ence used he echniques o c ea i e accoun ing echniques and whe he i s a i ude owa ds hei use changed du ing he exis ence o he company, i.e. whe he he company s a ed using c ea i e accoun ing o a g ea e ex en o whe he , on he con a y, I: Basic cha ac e is ics o selec ed cases Case A Case B Case C Case D Con ac pe son Execu i e Execu i e Accoun an Accoun an Legal o m s. . o. (~LLC) s. . o. (~LLC) s. . o. (~LLC) s. . o. (~LLC) Numbe o membe s 2 2 2 1 Regis e ed capi al in CZK 200 700 200 200 Numbe o employees 0 12 16 4 Inco po a ion 2009 1991 2007 2003 Line o business ci il cons uc ion elec onics manu ac u ing ope a ion o in e ne po als design ac i i ies CZ NACE F C J M Tu no e in millions CZK 10 40 20 5 Company’s p ofi inc easing s agnan un il 2011 inc easing, since 2012 dec easing making a loss o e he las yea s Pe cep ion o being hi by ec. c isis no hi no hi hi hi s ongly Sou ce: own elabo a ion Big Ba h as a De e minan o C ea i e Accoun ing in Small and Mic o En e p ises 1783 he use o c ea i e accoun ing dec eased du ing he exis ence o he company. O he ques ions we e di ec ed o he pe cep ion o he deg ee o which he company was aff ec ed by he economic c isis. The in e iews con inued bu o he ques ions we e associa ed wi h esea ch o o he de e minan s o c ea i e accoun ing since his pa icula esea ch is pa o a la ge one. The companies’ a io o p ofi and u no e is ep esen ed in Fig. 1. The cha shows he indica o in he su eyed en e p ises in each yea o he exis ence o he company. In case A, he cha shows a clea ly no iceable decline in he company’s a io o p ofi and u no e in 2011. An in e iew wi h he con ac pe son e ealed ha in ha yea he company signifi can ly inc eased he use o c ea i e accoun ing due o he g ow h in i s p ofi . P ofi g ow h in he condi ions o a close ela ion o p ofi and ax obliga ions o he company led he company owne s o a emp s o educe he amoun o axes paid. This was he eason o he inc ease in he use o c ea i e accoun ing. The in e iew also e ealed ha he company has been hi by he economic c isis. The decline in he a io o p ofi and u no e can be conside ed a big ba h in accoun ing. In case B, he indica o has been inc easing sligh ly since 2004. By con as , i has been dec easing sligh ly since 2004. In 2004, he inc ease in he indica o is mo e signifi can han in o he yea s. The in e iew showed ha in ha yea he company signifi can ly es ic ed he use o c ea i e accoun ing, mainly because o he pe sonal posi ion o he company owne and changes in his amily si ua ion. The con ac pe son also s a ed ha he company did no eel o be aff ec ed by he economic c isis. The de elopmen o he company’s p ofi and u no e a io can be conside ed a so o e e se ba h in accoun ing. Fu he mo e, he cha shows a no iceable decline in he indica o o company C h oughou i s exis ence. Du ing he conside ed pe iod, he cha does no indica e any sho - e m d op o inc ease in he indica o , i.e. he big ba h in accoun ing o i s e e se a ian . The en e p ise limi ed he use o c ea i e accoun ing in 2012 bu he e olu ion o he indica o does no ye sugges any hing ela ed o he exis ence o a big ba h o he indica o in ques ion. Whe he his ac will infl uence he e olu ion o he a io o he selec ed a iables will only be possible o fi nd a e he publica ion o fi gu es o 2013. As he company’s con ac pe son s a ed, he company has, since 2009, been expe iencing a decline in p o ision o se ices because o he economic c isis. The de elopmen o he indica o can he e o e be aff ec ed by he economic c isis. The cha shows a clea ly no iceable decline in he company D a io o p ofi and u no e in 2009. The in e iew e ealed ha managemen has no signifi can ly changed hei a i ude owa ds c ea i e accoun ing and also he ac ha he company has been signifi can ly hi by he economic c isis since 2009. The de elopmen o he indica o is he e o e signifi can ly aff ec ed by he economic c isis. The ac ha in his case i is no a big ba h in he company’s a io o p ofi and u no e bu infl uence o he economic c isis on he indica o can also be jus ifi ed by he low alue o he indica o in he wo ollowing accoun ing pe iods. I is he e o e no an immedia e d op bu a long- e m s a us. The de elopmen o he indica o in 2012 p o es ha he en e p ise o e come he economic c isis. The con ac pe son confi ms ha in 2012 he company saw a signifi can g ow h in he olume o se ices p o ided. All ou o he in e iews also showed ha en e p ises use c ea i e accoun ing due o eff o s o educe he amoun o compulso y paymen s, whe he i is co po a e income ax o pe sonal income ax and social and heal h insu ance o employees. This ac is ela ed o he close link be ween he p ofi and he ax base in he condi ions o he Czech ax and accoun ing sys ems. In he con ex o hese links, in e iews show ha en e p ises wi h g owing p ofi used c ea i e accoun ing mo e and hose wi h dec easing p ofi use i less. He e i can be assumed ha he use o Ͳ20% Ͳ10% 0% 10% 20% 30% 40% 2001 2003 2005 2007 2009 2011 Ra io o p o i and u no e in % A B C D 1: P o i and u no e o he su eyed companies Sou ce: own elabo a ion 1784 Lenka Zemánko á c ea i e accoun ing in he con ex o eff o s o dec ease p ofi is ela ed o he ocus o he esea ch on small and mic o-en e p ises. DISCUSSION OF THE FINDINGS C ea i e accoun ing is a phenomenon whose consequences a e nega i e o bo h he en e p ise and he economy, despi e he ac ha some au ho s claim ha he eff ec s a e in p inciple posi i e (e.g. Roden and Sadan, 1980; Wang and Williams, 1994; Sub amanyam, 1996; Ama e al., 2000). Nega i e consequences (lis ed, o example, by Smi h, 1992; Alb ech , 2006; Tumpach, 2008) and hei impac on he economy o he S a e a e he eason o he educ ion and p e en ion o c ea i e accoun ing. One way o limi ing c ea i e accoun ing is imp o ing he de ec ion o accoun ing manipula ion. Big ba h in accoun ing, i.e. a sho - e m d op in ce ain fi nancial indica o s, may be used as one o he de e minan s o changes in app oach o c ea i e accoun ing. One o he indica o s ha can be used o de ec changes in he app oach o c ea i e accoun ing is he a io o p ofi and u no e (simila ly o Ra isanka e al., 2011). A fl uc ua ion o his indica o may be conside ed, in acco dance wi h Blake e al. (1995), o be a esul o a change in he a i ude o c ea i e accoun ing a he han i s cause as Healy (1985) belie es. A d op in he indica o s can de ec an inc eased use o c ea i e accoun ing in he en e p ise; on he con a y, i s sho - e m inc ease may de ec es ic ion o use o c ea i e accoun ing in he en e p ise. The use o such d op in he company’s a io o p ofi and u no e o de ec an inc eased use o c ea i e accoun ing is es ic ed by he economic c isis, which aff ec s his indica o . The esul o he economic c isis, howe e , may ha e a long- e m impac on he unde aking, and he e o e he indica o may also be infl uenced in long e m. Ne e heless, he use o he indica o o company’s a io o p ofi and u no e as a de e minan o changes in he company’s app oach o c ea i e accoun ing is limi ed in he e en o he company being s icken by he economic c isis, and his mus be aken in o accoun . The abo e indica o can be be e used o de ec c ea i e accoun ing in en e p ises which do no eel o be aff ec ed by he economic c isis. CONCLUSION C ea i e accoun ing is a phenomenon wi h a nega i e impac on he economy. C ea i e accoun ing p o ides no only manipula ed da a o business owne s and sha eholde s, bu also alse in o ma ion o s a is ics on he de elopmen o he economy o he S a e. In a sys em whe e he e is a close ela ionship be ween accoun ing and he ax sys em, as is he case in he Czech Republic, manipula ed accoun ing di ec ly aff ec s he income componen o he S a e budge , which b ings abou de e io a ion in he effi ciency o esou ce alloca ion in he economy. C ea i e accoun ing also has indi ec impac on he decline in us and ade. The nega i e eff ec s o c ea i e accoun ing a e he eason o he need o deal wi h issues ela ing o i s limi a ion and p e en ion. The e is p obably no eliable way o p e en all cases o accoun ing manipula ion. Inc easing he isk o disclosu e o he accoun ing manipula ions, howe e , con ibu es in he fi gh agains and p e en ion o his phenomenon. De ec ion o c ea i e accoun ing is no an easy ask. In p ac ice, companies ha a e unco e ed a e mos ly hose whose manage s use oo agg essi e echniques and ha e no co ec ly assessed he bounda y be ween ea nings managemen and aud, and clea ly iola ed legal no ms. O e all, i has been confi med ha in p ac ice i is diffi cul o iden i y companies ha abuse accoun ing (Dechow and Skinne , 2000). Imp o emen in he de ec ion o c ea i e accoun ing is he subjec o a numbe o esea ch s udies; howe e , i canno be said ha he de ec ion o accoun ing manipula ions is suffi cien . The e o e, examina ion o o he de e minan s o c ea i e accoun ing and aising awa eness o he issue o accoun ing manipula ions can ha e a es ic i e as well as a p e en i e impac on c ea i e accoun ing. 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