92% of investors wary of firms using misleading accounting: survey

3 in 10 singled this out as the factor that would reduce their chances of investing in a firm.

An overwhelming 92% of Singaporean investors believe that companies in their portfolio resort to “creative accounting” in the next 12 to 18 months in order to attract investments, according to a study commissioned by financial software firm BlackLine.

Creative accounting, the use of financial loopholes to present figures in a legal but misleading way, is a major concern for Singaporean investors who believe that companies will use this tactic over the next 12 to 18 months.

Three in 10 (31%) singled out evidence of creative accounting as the factor that would make them less likely to invest in a company. As nearly all Singaporean respondents (91%) also think a global recession will happen in the next 12 to 18 months, none of them would invest in a company with a poor financial record without taking some form of corrective action first.

Other red flags include risk of internal financial fraud or non-compliance (29%), consistent late filings (33%), and post-reporting adjustments (30%).

Growth potential of the company’s sector, global or domestic economic outlook, and access to real-time company finances (all 47%) were identified as top considerations before investing.

Photo courtesy of Pexels.com.