Everyone likes creativity, right? From that artfully angled Instagram post of your expertly prepared breakfast to the cleverly worded article on your favorite blog—in the information age, creativity is what makes the world go round. It’s what makes ideas, people, and companies stand out from the crowded web of consumers’ available options and say, “Look at me! I’m different!” But does creativity have a place in a profession as straightforward and serious as accounting? What is creative accounting, and how do you know when you’ve crossed the line into misleading accounting territory?
While the rest of the world is constantly pushing the boundaries of ingenuity toward newer and greater heights, accountants know that there are limits. There are strict laws enforcing what we can and cannot do, and the penalties for breaking those laws—both for ourselves and for our clients—can be steep.
While there is continued stigma in the accounting community as to whether there is even such a thing as ethical creative accounting, more and more experts have conceded that there’s nothing wrong with thinking a little outside the box of textbook accounting practices, as long as you stay inside the greater box of ethics and legality.
Here are a few ways to spot the difference:
Generally Accepted Accounting Principles (GAAP)
Every CPA is familiar with these. Since day one of working toward your certification, you’ve studied these all-encompassing rules of accounting in depth. As you gain more experience, you may come to realize that some standards of the GAAP seem open to personal interpretation.
The first step to ethical creative accounting is to know the GAAP inside and out. If you find a new solution to a client’s dilemma, evaluate your plan against every applicable standard within the GAAP to determine whether it can be interpreted as legal within the code. In many situations, an accountant’s new innovation may be upheld by one section of accounting code but prohibited under another principle.
Along with consulting the GAAP, take a minute to check your gut. Be honest with yourself. You’re an ethical person. You know the difference between right and wrong. If a client is pushing for an “innovative” solution and you get that knot in your stomach that tells you it’s misleading, you’re probably right.
As you review accounts in a new and more creative way, make sure everyone’s intentions—both yours and your client’s—are on the up and up. And if you’re feeling pressure from a client or boss to take a leap into less than savory territory, speak up. Be clear about the legal and ethical limitations of what you can and cannot do.
Seek a Second Opinion
If you’ve studied the laws, consulted your own moral code, and you’re still not quite sure what to do—seek some guidance from a colleague you know and trust. Find a mentor whose work you admire, both for their innovation and their iron-clad ethics. Even by presenting a hypothetical scenario, you can gain insight through a knowledgeable third party’s reaction to your ideas. Do they think you’re brilliant? Or find your practice a little misleading? Pay attention to your mentor’s honest reaction—it’s likely representative of what industry consensus would be.
And there’s another benefit to seeking a second opinion. When you’re working within the bubble of client needs and your personal opinion, ethical considerations can get fuzzy. Willingly exposing your work to an objective third party forces you to think long and hard about whether your creativity may draw any risk to your reputation as a CPA.
There will always be pressure from clients to save more money, find more loopholes, be more innovative. Of course there’s nothing wrong with seeking to provide the best possible customer service—but when you reach the ethical line, stand your ground. At the end of the day, all you want to be is a great, well-reputed CPA—not the world’s next Bernie Madoff.