The Influence of External Auditing in Limiting the Creative Accounting Practices in SMEs

Abstract

This study aims to identify the role of external auditing in limiting the practice of creative accounting among Small and Medium Enterprises (SMEs) in the Kingdom of Saudi Arabia. Creative accounting involves providing fraudulent numbers and may be contained through efficient external auditing and the use of the rules and conduct of professional ethics. To achieve study objectives, a descriptive approach was taken by conducting a field study using a comprehensive inventory method. To suit the nature of the study, this method targeted all audit offices not licensed to practice with joint-stock companies. A questionnaire was used to collect data from the study population, and SPSS was used to analyze the results. The study results indicate that efficiency in external auditing contributes to limiting the practice of creative accounting among SMEs through procedures and audit plans, optimal use of resources (e.g., auditors), and knowledge and use of the rules and conduct of professional ethics. This study also composed a set of proposals to serve practitioners and decision makers, including measures that ensure and develop procedures in audit offices that contribute to discovering and reducing illegal practices. KEYWORDS accounting offices, auditing efficiency, financial statements, fraudulent accounting, professional conduct, professional ethics