Earnings Management - 3502 Words

Is earnings management good or bad? Who (or which part of corporate governance mechanisms) is responsible to constrain earnings management? To what extent can the auditor constrain earnings management? Propose some methods for the auditors to detect and constrain earnings management. Does market react to firms earnings management behavior? In order to discuss earnings management and what its affects are on business and whether or not its a good thing, one must first understand what earnings management really is. Earnings management is often referred to as creative accounting or income smoothing. By definition, earnings management is strategies used by the management of a company to deliberately manipulate the companys earnings so†¦show more content†¦Lastly, company participates in good earnings management is because it provides a way to present information to its present and potential investors about their operations. Actions such as these that achieve stable and predictable results and positive earnings trends through good planning and operational responsiveness are not illegal or unethical in any way, its just part of business. All businesses try to reach their targets and try to continue seeing growth while responding to their competition and changes in the market. Good earnings management just allows th e company to continue their operations with some type of goal to achieve or target to reach. This only becomes a bad thing when those goals or targets are not reached and someone starts making up the numbers. Overall, only improper or abusive earnings management is a bad technique. Managers and companies should focus on the long-term value creation that benefits investors over the short-term earnings management that satisfies financial analysts. Quarterly or periodically managing earnings is a bad idea for many reasons. First, quarterly predictions narrowed down to a couple of cents per share dont say much about the companys long-term prospects or ability to generate profits. Second, as mentioned above, its illegal to abusively manage earnings and if the company does get caught for doing so, the actions of the company end up costing theShow MoreRelatedEarning Management1159 Words   |  5 PagesEarning management is good or not? Introdcution This essay is to examine whether earning management is it good or bad. Though there is so many debate about whether it should be accepted to be good rather than bad, however, this essay will explain the both side of earnings management. Earnings management reduces the quality of financial reporting, it can interfere with the resource allocation in the economy and can bring adverse consequences to the financial market. This essay analyses both, causesRead MoreEarning Management: Is It Good or Not?1167 Words   |  5 PagesEarning management is good or not? Introdcution This essay is to examine whether earning management is it good or bad. Though there is so many debate about whether it should be accepted to be good rather than bad, however, this essay will explain the both side of earnings management. Earnings management reduces the quality of financial reporting, it can interfere with the resource allocation in the economy and can bring adverse consequences to the financial market. This essay analyses both, causesRead MoreEarnings Management Essay1007 Words   |  5 Pagesevidences of managers manipulating the earnings for various reasons. â€Å"Earnings management is the choice by a manager of accounting policies, or real actions, affecting earnings so as to achieve some specific reported earnings objective† (Scott, 2012, p. 423). Managers play an important role in the company because they have control over the accounting policies, thus, the managers can manipulate the income. There are different viewpoints about earnings management. 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This dissertation investigates another potential earnings management threshold, peer performance, which has been largely ignored in theRead MoreEarning Management4183 Words   |  17 PagesIndustry of UAE Practice Earnings Management Dr. Mohammed Obeidat Introduction It is the right of external users of accounting information to be provided with more adequate information to protect their interests. Many questionable issues concerning the term of earnings management are still available. Auditors, accountants, financial analysts, and other concerned parties may hold the responsibility of detecting external users from the practices of earnings management. Many questionable issuesRead MoreEarning Management4172 Words   |  17 PagesBanking Industry of UAE Practice Earnings Management Dr. Mohammed Obeidat Introduction It is the right of external users of accounting information to be provided with more adequate information to protect their interests. Many questionable issues concerning the term of earnings management are still available. Auditors, accountants, financial analysts, and other concerned parties may hold the responsibility of detecting external users from the practices of earnings management. Many questionable issuesRead MoreThe Practices Of Earnings Management1342 Words   |  6 PagesFrom my point of view, I believe that the different practices of earnings management are misleading to the stakeholders, and it aims at increasing or decreasing the reported earnings based on the executive decisions and what would serve their position in the market. This drives us to ask who the users of the company’s financial statements are. Those are the parties that rely on financial statements for decision making. And they are summarized in the following groups: Employees, Customers, SuppliesRead MoreA History Of Earnings Management1624 Words   |  7 PagesA History of Earnings Management, Financial Scandals, and the Resulting Legislations At the turn of the 21st century, America found itself wrought with multiple financial scandals. The poor decisions of just a few executives resulted in thousands of people out of a job, pension funds wiped away, and houses going back to the bank. While earnings management was certainly not a new concept nor was the resulting fraud, the high number of scandals within a short period of time brought it front and center