Voodoo Accounting

Voodoo accounting is creative rather than conservative and proper accounting practices. Voodoo accounting employs numerous accounting gimmicks to artificially boost the bottom line by inflating revenue or concealing expenses or both. The origin of the term “voodoo accounting” lies in the fact that profits can be made to appear like magic with certain accounting tricks. Investor reaction to news that a company has been engaged in voodoo accounting depends on the magnitude of the offense. While minor, one-time accounting gimmicks may be ignored by investors, substantial repeat offenses would affect the company’s market value and reputation.