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Creative Accounting, Fraud and International Accounting Scandals by Michael John Jones

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Chapter 6

Impression Management

Michael Jones

6.1 INTRODUCTION

A company’s financial statements are presented to the shareholders in an annual report. This annual report provides ample opportunity for management to package the numbers and to present them in a way that gives users a particular impression of the firms’ results. This management of the presentational aspects of the annual report (such as accounting narratives, graphs and photographs) is called impression management. Like creative accounting, impression management is not illegal.

Impression management can be seen as a basic human trait. When we go for an interview or go on a date we try to give a favourable impression of ourselves. After all, we want the job or a second meeting. As Schlenker (1980, p. v) put it: ‘Impression management, or image control, is a central aspect of interpersonal relations. Consciously or unconsciously, people attempt to control images in real or imagined social interactions.’ Impression management can be traced back to the work of Goffman (1959).

Managers thus try to present their results in the most favourable light. Three major methods by which they do this, as Figure 6.1 shows, are accounting narratives, graphs and photographs. Accounting narratives are the written parts of the annual report, such as the Chairman’s Statement (or President’s Letter in the USA) or the Business Review (Management Discussion and Analysis in the USA) where managers can discuss the events of the year.

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