40:
712:"Increasingly, I have become concerned that the motivation to meet Wall Street earnings expectations may be overriding common sense business practices. Too many corporate managers, auditors, and analysts are participants in a game of nods and winks. In the zeal to satisfy consensus earnings estimates and project a smooth earnings path, wishful thinking may be winning the day over faithful representation."
780:
and weak governance structures are more likely to be engaging in earnings management. More recent research suggested that linguistics-based methods can detect financial manipulation, for example studies in 2012 found that whether a subsequent irregularity or deceptive restatement occurred is related
683:
earnings management goes on. People have been tried and convicted." A 2020 report indicated that earnings management was the most common type of accounting fraud the SEC has taken action against under its whistleblower program.
728:
Earnings management involves the manipulation of company earnings towards a pre-determined target. This target can be motivated by a preference for more stable earnings, in which case management is said to be carrying out
687:
The SEC has criticized earnings management as having adverse consequences for financial reporting, and for masking "the true consequences of management's decisions". It has called on standard-setters to make changes to
748:. Accounting decisions can in turn affect earnings because they can influence the timing of transactions and the estimates used in financial reporting. For example, a comparatively small change in the estimates for
662:
Earnings management is believed to be widespread. A 1990 report on earnings management situations stated that "short-term earnings are being managed in many, if not all companies", and in a 1998 speech,
733:. Opportunistic income smoothing can in turn signal lower risk and increase a firm's market value. Other possible motivations for earnings management include the need to maintain the levels of certain
1118:
654:
called earnings management "widespread". Despite its pervasiveness, the complexity of accounting rules can make earnings management difficult for individual investors to detect.
696:
transparency, and has called for increased oversight over the financial reporting process. The SEC has also pressed charges against the management of firms involved in
875:
827:
Healy, Paul M., and James Wong. Wahlen. 1999. “A Review of the
Earnings Management Literature and Its Implications for Standard Setting.”
304:
744:
Earnings management may involve exploiting opportunities to make accounting decisions that change the earnings figure reported on the
635:
about the organization's underlying performance, or to "influence contractual outcomes that depend on reported accounting numbers."
289:
1075:
Richardson, Scott A.; A. Irem Tuna; Min Wu (October 2002). "Predicting
Earnings Management: The Case of Earnings Restatements".
294:
772:
Earnings management may be difficult for individual investors to detect due to the complexity of accounting rules, although
603:
454:
158:
55:
1228:
309:
299:
65:
664:
647:
361:
1285:
Hobson, Jessen L.; William J. Mayew; Mohan
Venkatachalam (2012). "Analyzing Speech to Detect Financial Misreporting".
489:
366:
990:
314:
257:
398:
1327:
882:
351:
795:
963:
Ball, Ray (2013). "Accounting
Informs Investors and Earnings Management is Rife: Two Questionable Beliefs".
1342:
1332:
1258:
Larcker, David F.; Anastasia A. Zakolyukina (2012). "Detecting
Deceptive Discussions in Conference Calls".
1145:"Detecting and Predicting Accounting Irregularities: A Comparison of Commercial and Academic Risk Measures"
1337:
1005:"SEC Charges Former Chief Accounting Officer of Beazer Homes for Fraudulent Earnings Management Scheme"
1101:
1229:"Earnings Management: Reconciling the Views of Accounting Academics, Practitioners, and Regulators"
757:
596:
403:
39:
1182:
914:
798:, Economics Working Papers 1434, Department of Economics and Business, Universitat Pompeu Fabra.
632:
237:
113:
1027:"COMMISSION CHARGES TWO FORMER BRISTOL-MYERS OFFICERS FOR FRAUDULENT EARNINGS MANAGEMENT SCHEME"
845:
671:
called earnings management a "widespread, but too little-challenged custom". In a 2013 essay,
529:
464:
188:
1088:
1080:
796:
Truthfulness in accounting: How to discriminate accounting manipulators from non-manipulators
514:
252:
118:
60:
764:
can increase net income in times of rising prices by delaying purchases to future periods.
745:
689:
564:
103:
8:
773:
741:
covenants, and the pressure to maintain increasing earnings and to beat analyst targets.
693:
676:
643:
624:
589:
549:
524:
519:
459:
388:
346:
328:
281:
262:
193:
98:
23:
1144:
1302:
1202:
393:
228:
183:
1061:
1298:
1271:
1206:
1076:
776:
have proposed several methods. For example, research has shown that firms with large
628:
574:
569:
148:
123:
1306:
1294:
1267:
1240:
1194:
1156:
1119:"Quality of Earnings and Earnings Management: A Primer for Audit Committee Members"
1057:
1004:
972:
639:
356:
242:
941:
734:
444:
408:
198:
178:
163:
108:
93:
50:
1198:
1244:
846:"Earnings Management and Its Implications: Educating the Accounting Profession"
449:
417:
128:
1026:
1321:
1115:
782:
719:
668:
651:
559:
422:
341:
336:
173:
627:
to obtain some private gain. Earnings management involves the alteration of
494:
233:
1284:
1143:
Price lll, Richard A.; Sharp, Nathan Y.; Wood, David A. (December 2011).
761:
722:, in a speech to the NYU Center for Law and Business, 28 September 1998.
672:
380:
1160:
976:
753:
620:
484:
168:
31:
1048:
Subramanyam, K. R. (1996). "The pricing of discretionary accruals".
777:
749:
1181:
Prawitt, Douglas F.; Smith, Jason L.; Wood, David A. (July 2009).
267:
247:
153:
814:
Schipper, Katherine. 1989. “Commentary on
Earnings Management.”
1257:
413:
88:
697:
436:
218:
83:
1074:
738:
223:
679:
was not reliably documenting earnings management, wrote: "
876:"SEC Sharply Criticizes "Earnings Management" Accounting"
844:
Akers, Michael D.; Giacomino, Don E.; Bellovary, Jodi L.
794:
Vladu, A. B., Amat, O., & Cuzdriorean, D. D. (2014).
623:, is the act of intentionally influencing the process of
1226:
657:
991:"Improper revenue recognition tops SEC fraud cases"
936:
934:
932:
843:
1142:
909:
907:
905:
903:
1319:
1183:"Internal Audit Quality and Earnings Management"
1180:
929:
767:
900:
1227:Dechow, Patricia; Douglas J. Skinner (2000).
781:to the linguistics used by top management in
638:Earnings management has a negative effect on
597:
1047:
305:International Financial Reporting Standards
703:
604:
590:
839:
837:
1278:
1068:
956:
869:
867:
665:Securities and Exchange Commission (SEC)
1251:
1220:
1320:
1108:
1041:
873:
834:
821:
864:
808:
658:Occurrence and response by regulators
295:Generally-accepted auditing standards
962:
852:. The New York State Society of CPAs
642:, and may weaken the credibility of
1050:Journal of Accounting and Economics
915:"Remarks by Chairman Arthur Levitt"
310:International Standards on Auditing
13:
788:
648:Securities and Exchange Commission
14:
1354:
752:can have a significant effect on
367:Notes to the financial statements
1299:10.1111/j.1475-679x.2011.00433.x
1272:10.1111/j.1475-679x.2012.00450.x
1114:
707:
646:. Furthermore, in a 1998 speech
315:Management Accounting Principles
38:
1174:
1136:
1019:
1287:Journal of Accounting Research
1260:Journal of Accounting Research
997:
983:
942:"What is earnings management?"
16:Misleading accounting practice
1:
1062:10.1016/s0165-4101(96)00434-x
802:
768:Detecting earnings management
758:last-in, first-out accounting
290:Generally-accepted principles
7:
1199:10.2308/accr.2009.84.4.1255
10:
1359:
1245:10.2308/acch.2000.14.2.235
783:earnings conference calls
159:Constant purchasing power
56:Constant purchasing power
490:Accounting organizations
478:People and organizations
704:Motivations and methods
238:Amortization (business)
1096:Cite journal requires
774:accounting researchers
756:, and a company using
750:uncollectible accounts
1328:Management accounting
1187:The Accounting Review
874:Munter, Paul (1999).
700:earnings management.
675:, while opining that
362:Management discussion
746:financial statements
690:accounting standards
329:Financial statements
282:Accounting standards
1343:Financial reporting
1333:Accounting research
1233:Accounting Horizons
1149:Accounting Horizons
965:Accounting Horizons
888:on 5 September 2012
829:Accounting Horizons
818:(December): 91–102.
816:Accounting Horizons
694:financial statement
677:accounting research
644:financial reporting
625:financial reporting
617:Earnings management
555:Earnings management
525:Positive accounting
399:Double-entry system
389:Bank reconciliation
194:Revenue recognition
1338:Accounting systems
1161:10.2308/acch-50064
977:10.2308/acch-10366
530:Sarbanes–Oxley Act
465:Sarbanes–Oxley Act
394:Debits and credits
229:Cost of goods sold
184:Matching principle
735:accounting ratios
726:
725:
629:financial reports
614:
613:
575:Two sets of books
570:Off-balance-sheet
212:Selected accounts
149:Accounting period
1350:
1311:
1310:
1282:
1276:
1275:
1255:
1249:
1248:
1224:
1218:
1217:
1215:
1213:
1193:(4): 1255–1280.
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1140:
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1133:
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1129:
1123:
1112:
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1066:
1065:
1056:(1–3): 249–281.
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1016:
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898:
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895:
893:
887:
881:. Archived from
880:
871:
862:
861:
859:
857:
841:
832:
831:13 (4): 365–383.
825:
819:
812:
731:income smoothing
708:
640:earnings quality
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599:
592:
42:
19:
18:
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850:The CPA Journal
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789:Further reading
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331:
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205:
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199:Unit of account
179:Historical cost
164:Economic entity
143:
135:
134:
133:
78:
70:
51:Historical cost
17:
12:
11:
5:
1356:
1346:
1345:
1340:
1335:
1330:
1313:
1312:
1293:(2): 349–392.
1277:
1266:(2): 495–540.
1250:
1239:(2): 235–250.
1219:
1173:
1155:(4): 755–780.
1135:
1116:Weil, Roman L.
1107:
1098:|journal=
1067:
1040:
1018:
996:
982:
971:(4): 847–853.
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944:. Investopedia
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418:General ledger
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720:Arthur Levitt
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669:Arthur Levitt
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423:Trial balance
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404:FIFO and LIFO
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337:Annual report
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174:Going concern
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1210:. Retrieved
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1164:. Retrieved
1152:
1148:
1138:
1126:. Retrieved
1110:
1089:cite journal
1070:
1053:
1049:
1043:
1031:. Retrieved
1021:
1009:. Retrieved
999:
985:
968:
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958:
946:. Retrieved
919:. Retrieved
890:. Retrieved
883:the original
854:. Retrieved
849:
828:
823:
815:
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771:
743:
730:
727:
711:
686:
680:
661:
637:
633:stakeholders
616:
615:
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495:Luca Pacioli
416: /
236: /
234:Depreciation
142:Key concepts
114:Governmental
762:inventories
692:to improve
631:to mislead
508:Development
485:Accountants
381:Bookkeeping
300:Convergence
258:Liabilities
189:Materiality
77:Major types
1322:Categories
1128:14 January
1033:14 January
1011:14 January
948:14 January
921:14 January
892:14 January
856:14 January
803:References
754:net income
698:fraudulent
621:accounting
543:Misconduct
169:Fair value
119:Management
61:Management
32:Accounting
1207:154999202
681:Of course
667:chairman
650:chairman
565:Hollywood
445:Financial
347:Cash-flow
104:Financial
1307:27832619
778:accruals
673:Ray Ball
550:Creative
520:Research
450:Internal
437:Auditing
253:Goodwill
248:Expenses
99:Forensic
24:a series
22:Part of
1212:28 July
1166:28 July
1124:. AICPA
737:due to
515:History
409:Journal
268:Revenue
154:Accrual
1305:
1205:
1081:338681
1079:
460:Report
414:Ledger
357:Income
352:Equity
263:Profit
243:Equity
219:Assets
124:Social
89:Budget
1303:S2CID
1203:S2CID
1122:(PDF)
1029:. SEC
1007:. SEC
917:. SEC
886:(PDF)
879:(PDF)
619:, in
455:Firms
84:Audit
1214:2016
1168:2016
1130:2014
1102:help
1077:SSRN
1035:2014
1013:2014
950:2014
923:2014
894:2014
858:2014
760:for
739:debt
224:Cash
109:Fund
94:Cost
1295:doi
1268:doi
1241:doi
1195:doi
1157:doi
1058:doi
973:doi
129:Tax
66:Tax
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