Voodoo Accounting system is an accounting system that uses unscrupulous methods, especially with a motive to please investors. For example, voodoo accounting may inflate profits by transferring funds to an off-the-books account set aside just for that purpose. It may also hide losses in subsidiaries or do other things to misrepresent a company’s financial state.
It is a form of accounting that does not follow principles of conservatism. While there are many methods by which financial statements can be fudged, it always comes down to inflating revenue or hiding expenses. Examples of accounting shenanigans include the big bath, cookie jar accounting and improper recognition of revenue.
It is a method that boosts profitability through accounting tricks eventually catches up with the company. As soon as it does “poof”, past profits disappear like magic.