Introduction There are multiple accounting concepts underpinning the assumptions made in the preparation of financial reports. Different countries have varying regulations depending on the reality on the ground. The United Kingdom (UK) has one of the most regulated processes as far as accounting is concerned. However, the existence of these controlling frameworks does not eliminate cases of ambiguities. For example, there are various estimations and assumptions made by preparers of financial statements in the UK. Principles informing the preparation of accounting reports are formulated against the background of various rules and regulations. With these varied options at the disposal of the accountants and auditors, instances where companies exploit loopholes in financial regulations are on the rise. The motive of such companies is to take advantage of the undefined areas to serve their own selfish interests. They do this by misrepresenting financial figures. In this paper, the author analyses the various loopholes existing in the UK financial regulatory frameworks. In addition, the author reviews how companies exploit these ambiguities and the impacts of their actions on the financial market and the economy as a whole. Financial Reporting and Regulatory Schemes Scenarios of accounting malpractices persist in many financial institutions. The situation is the same in bureaucratically controlled market environments. Financial analysts are of the opinion that regulatory agencies are the same parties responsible for the creation of loopholes. Accounting regulations are not static. They change with time. As these standards evolve, financial agencies become creative and start exploiting the resulting weaknesses. Milne, Guthrie and Parker (2008) contend that creative accounting is not identified by law as an illegal practice. However, the intention of those participating in these acts is to deviate from the norms. Financial reports arising from creative accounting are misleading to the public and to other consumers. They are only deemed to satisfy the needs of the preparers and the companies. Regulation of Accounting Processes in the United Kingdom The UK has some of the highly regulated institutions in the developed world. There are various agencies and legislations put in place to safeguard the interests of the public as far as accounting is concerned. Generally Accepted Accounting Practice (GAAP) is one such institution charged with the responsibility of overseeing the operations of players in the accounting industry (Milne et al. 2008). In addition, GAAP is used as a statutory provision in UK’s tax acts. To enhance the effective reporting of financial figures, the agency has put in place mechanisms referred to as Standard Accounting Practices [SAP] (Kausa, Humphrey, Loft & Woods 2011). When incidences of fraud are reported, the Accounting Standards Board (ASB) is tasked with the responsibility of looking into the matter. It achieves this by implementing new rules to safeguard the integrity of the accounting process. After new rules are implemented, they are referred to as the Financial Reporting Standards [FRS] (Kausa et al. 2011). Before financial reports are released to the public, they are scrutinised