Business, Management and Accounting
3 years ago

Small Businesses Face Increased Fraud Risks Due to Creative Accounting

E+M Ekonomie a Management
COMPARISON OF CREATIVE ACCOUNTING RISKS IN SMALL ENTERPRISES: THE DIFFERENT BRANCHES PERSPECTIVE
Zita Drábková, Martin Pech

Paper Summary

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Small businesses face risks from creative accounting, which can distort their financial statements and increase fraud. The study looked at accounting errors and fraud risks in small enterprises in trade, processing, and construction. By comparing profit creation and cash flow, the researchers found that small businesses in these industries often use creative accounting methods for tax optimization and profitability. The differences in accounting practices between trade and construction industries were significant, with more risks identified in the construction sector. Detecting and evaluating these risks can help improve decision-making and internal control systems in small enterprises.