Profits management is directed towards maximizing the value of the enterprise in real terms and achieving positive things. As for creative accounting, it is heading towards misleading and fraud, while maximizing the value of the facility in a fake and unrealistic way.

Check this out: https://firdausindrajaya.files.wordpress.com/2010/12/creative-accounting-tutor-master.pdf

Dear Srikanth

Earnings management (EM) is a subset of creative accounting (CA). That is EM focuses on manipulating earnings through accruals and deferrals whereas CA can be EM plus fictitious transactions like Enron did. EM and CA have their own literature with some overlap. The field of study of creative accounting includes citations such as:

Article Creative Accounting Or Creative Destruction? Firm-Level Prod...

https://books.google.ca/books?hl=en&lr=&id=VWWHDwAAQBAJ&oi=fnd&pg=PA1&dq=creative+accounting+&ots=0qy1A_pbF6&sig=u27GuAG3fcnSTtmGXEdPe5bMjhE#v=onepage&q=creative%20accounting&f=false

https://books.google.ca/books?hl=en&lr=&id=S6Y2DwAAQBAJ&oi=fnd&pg=PT16&dq=creative+accounting+&ots=9TJ1Ytv0lp&sig=kPlWq-MWjaUbmw4trq0LI7aG1-0#v=onepage&q=creative%20accounting&f=false

https://www.semanticscholar.org/paper/The-ethics-of-creative-accounting-Amat-Blake/ae73d163bfe2897b60987ad51e156a56ef64ccef

Article Good, Bad or Ugly? On The Effects of Fiscal Rules with Creat...

https://www.emerald.com/insight/content/doi/10.1108/02686900410524427/full/html

https://www.tandfonline.com/doi/abs/10.1080/00014788.1995.9729931

Article Creative Accounting: Nature, Incidence and Ethical Issues

https://www.sciencedirect.com/science/article/abs/pii/S037842660600118X

Article Creative Accounting: Some Ethical Issues of Macro- and Micro...

Article Fool the Markets? Creative Accounting, Fiscal Transparency a...

Article Exploring the influences and constraints on creative account...

Article A note on the use of creative accounting

https://onlinelibrary.wiley.com/doi/abs/10.1111/1467-8608.00184

EM has to do with manipulation of earnings for obvious motives of management whereas CA is beyond EM as its has wider impact on the company financial reporting.

They are same, fraud and cheating.

earnings management as the choice by a manager of accounting policies so as to achieve some specific objectives. earnings management can be done legally. Example if the motivation is minimizing tax payable, then it can be done legally by utilizing taxation loopholes.

while Creative Accounting refers to fraud. It can be defined as the process by which accountants use their knowledge and experience of accounting standards to manipulate numbers reported in financial statements.

Earning Management or Creative Accounting is the product of decisions that managers use in financial statements and financial reporting to manipulate information for either misleading investors or customers or manipulating the market to respond favorably to the company's financial results.

thanks to all the professors for clarifying my doubt

There are some other terms which are used in connection with creative accounting. For example : Earnings Management, Aggressive Accounting, Impression Management, Profit Smoothing

Hi

Srikanth Potharla you can brouse the following link;

https://firdausindrajaya.files.wordpress.com/2010/12/creative-accounting-tutor-master.pdf

Well explained Raymond A K Cox

Earnings management can be considered as the manager's opportunism to achieve its interests or it can be done with the motivation of protecting the interests of shareholders. However, earnings management is an unethical practice within the framework of accounting standards. The most important challenge about earnings management is its motivation. Therefore, earnings management can be done both for the benefit of shareholders and to mislead them. Creative accounting is done to defraud. Opportunistic earnings management can be said to be a part of creative accounting.

Great explained Omid Farhadi

I agree with Omid Farhadi to the extent that EM is not to protect shareholders' interests, because it does not represent reality, but misrepresentation of the income/earnings profile to mislead the stakeholders to wrongly think management is doing well. This is done by:

1. Failing to apply the right standards for recognition and measurement of earnings; or

2. Deliberately applying the right standard wrongly; or

3. Applying the wrong standard, because it gives the impression desired.

Both EM and creative accounting (CA) are unethical, fraudulent and unacceptable. Really, EM and CA are the foundation of professional skepticism in audit.

Bassey Ina Ibor

Now I have a question for you, what solution do you suggest to reduce EM? We know that the flexibility of accounting standards is one of the reasons for EM. Do you think the lack of flexibility in accounting standards can reduce EM? Lack of flexibility in accounting standards can cost the company a lot. What is the solution?

Consistency in accounting estimates and an enterprise wide risk management framework taken along with a sanctions regime for misleading fina

ncial statements. Let's start from here and strengthen as we go forward.

Consistency in accounting estimates and an enterprise wide risk management framework taken along with a sanctions regime for misleading financial statements. Let's start from here and strengthen as we go forward.

Earnings management is more principle based, whereas creative accounting connotes bad intention to present a good picture. However, it is undeniable that the objectives of both methods is to present a good picture of the company accounts.

Bassey Ina Ibor

This is an interesting idea, but unfortunately it is difficult for all organizations to implement. It needs time, cost and everyone's acceptance. I wholeheartedly agree with you. Thank you for your reply