External Audit Procedures and Their Effectiveness in Detecting the Practice of Creative Accounting: An analytic Study in the Iraqi Environment

The study aims to identify the deceptive methods that used by firms in misleading financial statements and show the role of auditors in detecting the illegal behavior of firms which listed in Iraq Stock Exchange. In addition the study try to shed light on the influence of the deterrence’s penalties against companies apply creative accounting. The hypothesis of the study focused on: active role of auditors in reducing creative accounting practices in the financial statements for the companies worked in Iraqi markets. The study includes 13 companies as a sample listed in Iraqi Stock Exchange. According to Miller mathematical scale , the study concludes that studied companies have practiced improper accounting methods for the period (2012 to 2017). In addition it recommends that companies must be obliged to comply with the contents of international standard No. (1), the presentation of financial statements and the local accounting rule No. (6) and on the disclosure of information related to data and financial policies in paragraph (9/ Basic Principles and Provisions) ,which indicated to the need to exercise accuracy and caution when preparing financial statements and disclosing information related to them, but not to justify the formation of secret or undisclosed precautions.