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Creative Accounting in Small and Micro Companies in the Czech Republic
Zemánková, Lenka ; Kocmanová, Alena (referee) ; Schillerová, Alena (referee) ; Živělová, Iva (referee) ; Fedorová, Anna (advisor)
The dissertation deals with the issue of creative accounting of small and micro companies in the Czech Republic. Creative accounting is a phenomenon that gained importance in the 21st century after publicizing of a number of accounting scandals. In the context of economic crisis and budget deficit, the phenomenon of creative accounting, in particular the prevention and detection of financial manipulation, is a topical issue which draws attention of experts specialized in economics as well as of entire countries including the Czech Republic. The research focus on small and micro companies stems from the undeniable importance of this segment for the performance of the economy of the entire country. This dissertation provides a comprehensive view of the issue of creative accounting in terms of theoretical approaches as well as its practical application. Primary research is based on an analysis of the phenomenological paradigm, i.e. it focuses on the understanding of human behaviour on the basis of a reference framework of research participants. The main aim of primary research is to discover the motives, techniques, perception of risk and consequences of creative accounting in the Czech Republic. The main research method used in the research is a case study based on a comparison of four business entities. The consequences of creative accounting are illustrated on a critical case. The main limitation of the dissertation rests in the impossibility of examining a large sample. The research revealed some findings that are contributive in particular to practice in the area of prevention and detection of creative accounting. The research provides findings usable by supervisory bodies to improve detection of creative accounting, and thus to increase the perceived risks. Another contribution of the dissertation is a suggestion of several possible alterations of legislation which will help reduce existing opportunities of creative accounting in relation to the motives to carry out creative accounting. Assistance in directing further research into the issue of creative accounting may also be considered important, in particular for the theory.
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Deferred tax as a measurement of earnings management
Mišoň, Matěj ; Novák, Jiří (advisor) ; Hronec, Martin (referee) ; Pečená, Magda (referee)
This thesis investigates relationships between deferred taxes and possible earnings management in publicly traded companies on London Stock Exchange in FTSE 350 in the last several years. It also discusses other possibilities of earnings management, mostly by accruals. It builds on a model introduced by (Phillips J. D., Pincus, Rego, & Wan, 2004), which is a "probit" econometric maximum-likelihood estimation model. The results suggest there might be no relation of net deferred tax liabilities on earnings management to avoid a decline in earnings, and possibly some relation, although inconclusive, of deferred tax expense on earnings management.
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Deferred tax as a measurement of earnings management
Mišoň, Matěj ; Novák, Jiří (advisor) ; Polyák, Oliver (referee)
This thesis investigates relationships between deferred taxes and possible earnings management in publicly traded companies on London Stock Exchange in FTSE 350 in the last several years. It also discusses other possibilities of earnings management, mostly by accruals. It builds on a model introduced by (Phillips 2004), which is a "probit" econometric maximum-likelihood estimation model and I supplemented it by simple OLS pooled cross- sectional regression. The results suggest there might be no relation of net deferred tax liabilities on earnings management to avoid a decline in earnings, and possibly some relation, although inconclusive, of deferred tax expense on earnings management.
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Earnings Management under Financial Distress Conditions, the Effect of Tax Considerations
Britskiy, Andrey ; Novák, Jiří (advisor) ; Palanský, Miroslav (referee)
This master thesis attempts to contribute to the existing earnings management literature by examining whether tax avoidance incentives affect opportunistic accounting choices in distress conditions. To address this issue, it investigates 2668 companies in the quarters around breach of debt covenant spanning from 1996 to 2006. This allows to analyze two distress scenarios: first, whether the companies having the opportunity to minimize tax expenses and thus improve their financial stability, would deliberately switch from engaging in aggressive upwards real earnings management to tax considerations to mitigate the potential consequences of technical default; second, whether the companies facing increased lender's scrutiny after subsequent violation are compelled to switch by the creditor. The results indicate that tax considerations do not deter misreporting in the quarters around debt covenant violation. This thesis further provides evidence against the debt covenant hypothesis: the companies in the analyzed sample engaged in negative revenue manipulation in the quarters of new breach of debt covenant and in the quarters in which the firms remained in violation. In additional analysis, it was found that the above relationship is more prominent for the companies exhibiting poor financial performance.
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Revenue Management around Seasoned Equity Offerings
Habětínek, Jan ; Novák, Jiří (advisor) ; Džmuráňová, Hana (referee)
This bachelor thesis enhances existing research about unusual operating performance of firms that are subject to Seasoned Equity Offerings. It uses modern tools of estimation of earnings management by discretionary revenues measured as portion of account receivables that cannot be explained by revenues and credit policy. Therefore, it helps to discriminate between two existing explanations of the unusual operating performance, market timing and earnings management, with greater precision. Apart of finding evidence in favour of the earnings management theory, the results additionally, in contrast to previous research, suggest downward-oriented adjustment of revenues in the year before SEO and therefore provide evidence in favour of newly proposed "revenue buffer" hypothesis. Implicitly, combined with the past results, also a shift from dominance of expense management before SEO to dominance of revenue management at the time of SEO is suggested.
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Creative accounting
Luštický, Daniel ; Jurka, Robert (advisor) ; Roubíčková, Jaroslava (referee)
The aim of the bachelor thesis is a description of creative accounting. Starting with an explanation of basic functions of financial accounting, its users, main principles and regulations in the Czech Republic, the thesis continues with defining the main topic, creative accounting. Then the motive behind these fraudulent acts is described together with an offender, his motivation and demotivation. The most frequent techniques of creative accounting as well as prevention are included and detailed in the next part. The thesis also works with the term fraud and explains its influence on financial accounting. Lastly, specific companies practising creative accounting are analyzed.
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Creative accounting
Kryštůfek, Dominik ; Jurka, Robert (advisor) ; Roubíčková, Jaroslava (referee)
This Bachelor thesis is about accounting frauds and their consequences on multinational corporations. There is definition of creative accounting and difference between creative accounting and accounting fraud. There are some elementary ways and motivation from aspect of different groups in the company. There is explanation of term audit with most important principles and its risks. Main part of this thesis is about large multinational companies Enron, WorldCom and Parmalat, which were convicted from accounting fraud and then they went bankrupt. With this context I would like to verify, if there was some causality between accounting fraud and bankruptcy and, if there is so, how strong this causality was.
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Corporate governance and its association with audit quality
Dudová, Tereza ; Králíček, Vladimír (advisor) ; Müllerová, Libuše (referee)
The Thesis is focused on the concepts of audit committee and audit quality, which are the basic control mechanisms for the quality of financial statements. The Thesis first presents the reasons and conditions for the appointment of audit committee, then follows with the legal rules applicable for mandatory audit of financial statements and presents some common definitions and measures of audit quality. Next, the new regulation for mandatory audit in the European Union is presented. The practical part of the Thesis starts with an analysis of the annual reports of the companies that are a part of CZECH TOP 100 for the year 2014. The analysis is focused on auditor choice, audit fees, public interest entities and their obligation to appoint an audit committee. The next part contains an empirical analysis of the association between audit committee existence, auditor choice and audit quality, which is defined as the quality of reported earnings.
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Creative Accounting in Small and Micro Companies in the Czech Republic
Zemánková, Lenka ; Kocmanová, Alena (referee) ; Schillerová, Alena (referee) ; Živělová, Iva (referee) ; Fedorová, Anna (advisor)
The dissertation deals with the issue of creative accounting of small and micro companies in the Czech Republic. Creative accounting is a phenomenon that gained importance in the 21st century after publicizing of a number of accounting scandals. In the context of economic crisis and budget deficit, the phenomenon of creative accounting, in particular the prevention and detection of financial manipulation, is a topical issue which draws attention of experts specialized in economics as well as of entire countries including the Czech Republic. The research focus on small and micro companies stems from the undeniable importance of this segment for the performance of the economy of the entire country. This dissertation provides a comprehensive view of the issue of creative accounting in terms of theoretical approaches as well as its practical application. Primary research is based on an analysis of the phenomenological paradigm, i.e. it focuses on the understanding of human behaviour on the basis of a reference framework of research participants. The main aim of primary research is to discover the motives, techniques, perception of risk and consequences of creative accounting in the Czech Republic. The main research method used in the research is a case study based on a comparison of four business entities. The consequences of creative accounting are illustrated on a critical case. The main limitation of the dissertation rests in the impossibility of examining a large sample. The research revealed some findings that are contributive in particular to practice in the area of prevention and detection of creative accounting. The research provides findings usable by supervisory bodies to improve detection of creative accounting, and thus to increase the perceived risks. Another contribution of the dissertation is a suggestion of several possible alterations of legislation which will help reduce existing opportunities of creative accounting in relation to the motives to carry out creative accounting. Assistance in directing further research into the issue of creative accounting may also be considered important, in particular for the theory.
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