Transfer of accurate and timely financial information to the interested parties inside and outside the company is the main role of financial reporting. To this purpose, managers have opportunities to apply their judgments in financial reporting. Managers can use their knowledge about business activities to improve effectiveness of financial statements as a tool for transferring information to potential investors and creditors. However, if managers had incentives to mislead users of financial statements through exerting their authorities on accounting options in financial reporting, creative accounting would occur. Today, creative accounting is considered as one of interesting subject in accounting studies and it is defined as conscious behavior performed to reduce periodic fluctuations of earnings. Generally, researchers believe that managers consider income smoothing in order to present a sustainable picture of profitability in the flexible framework of common accounting principles and methods. Some evidence indicates that most of stockholders and creditors incline to invest in firms the management of which is able to provide a smoother picture of profitability. Motivationally, creative accounting is a qualitative item affected by several factors. In the present study it has been tried to study regarding the presence of creative accounting practices in the form of income smoothing.
