What do window dressing and cooking of books represent in financial reporting?

Window dressing and cooking of books are both terms associated with deceptive practices in financial reporting. They represent dishonest or manipulative accounting methods intended to create a misleading view of a company's financial health.

Window dressing typically refers to cosmetic changes made to financial statements at the end of a reporting period to make a company appear more financially stable or profitable than it actually is. This could involve overstating revenues, delaying expenses, or engaging in aggressive accounting practices that inflate key financial metrics, thereby misleading stakeholders.

Cooking the books is a more severe form of financial fraud that involves deliberately falsifying financial records. This may include tampering with accounting entries, misrepresenting financial performance, or engaging in illegal activities to conceal true financial conditions. Such actions are often undertaken to deceive investors or regulatory bodies, creating a facade of improved financial conditions.

These practices are illegal and unethical, and they undermine the integrity of the financial reporting system. They can lead to significant legal repercussions for individuals and organizations involved, further reinforcing that they are clear examples of financial statement fraud.