Questions On Financial Earnings Management - 1758 Words

Prior studies (e.g., Burgstahler and Dichev 1997; Degeorge, Patel and Zeckhauser 1999) identify three earnings thresholds managers seek to achieve when they report financial statements: avoiding negative earnings, avoiding earnings declines, and avoiding negative earnings surprises. A large number of studies use these three earnings thresholds to test earnings management in various research settings. This dissertation investigates another potential earnings management threshold, peer performance, which has been largely ignored in the extant literature. Both Burgstahler and Dichev (1997) and Degeorge et al. (1999) explain threshold-driven earnings management behavior by referring to the prospect theory (Kahneman and Tversky 1979), which suggests that for a given increase in wealth, the corresponding increase in value is the greatest when the increase in wealth moves from negative to positive territory relative to a reference point (viz., zero earnings, zero change in earnings or zero forecast error). While they do not specifically explain the formulation of reference points or the usage of other reference points beyond those extensively investigated three earnings thresholds, they imply the existence of other reference points (Burgstahler and Dichev 1997), ). and They also suggest that if other reference points are used either by corporate boards or investors, and if those reference points are reflected in the executives’ reward schedulesor compensation contracts, executivesShow MoreRelatedSatyam Scandal1623 Words   |  7 PagesSATYAM SCANDAL I. Analyze the case and respond to the following questions: (a) Discuss the earnings management techniques employed by the management of Satyam. In this case of Satyam, I can conclude that the obvious technique employed by the said management are: 1. â€Å"Big Bet on The Future†. When an acquisition occurs, the company acquiring the other is said to have made a big bet on the future. As refer to this case, Ramalingam Raju the Chairman of Satyam Computer Services LtdRead MoreEthics in Earnings Management Essays1320 Words   |  6 Pagesconcern. With that goal in mind, management must continually report sustained or improved earnings to stakeholders to ensure constant and new investments in the company’s future (Geiger van der Laan Smith, 2010). The pressure to report positive results can lead management to engage in earnings management activities to alter short-term results to meet the goals set forth (Geiger van der Laan Smith, 2010). In addition to the pressures on company management, broad accounting principles introduceRead MoreResearching Topics Of Interest Is A Key Starting Point For The Research Effort1538 Words   |  7 Pages By performing a complete research effort this will allow me to gain the necessary information to effectively ans wer the research questions, resolve the research problem, and meet the purpose of the research (Leedy Ormrod, 2013). The following sections include the formulation of potential topic areas of interest for my doctoral level research. Earnings Management: An Examination of Ethical Implications, Fraud, and the Related Impacts to Stakeholder Interests The first topic area involves anRead MoreEthics And Financial Reporting Decisions948 Words   |  4 PagesImpact of CFOs’ Incentives and Earnings Management Ethics on their Financial Reporting Decisions: The Mediating Role of Moral Disengagement. The key of the abstract is demonstrate how CFO’s personal incentives, interests of stakeholders, and regulatory reforms influence on earnings management ethics (p. 505). The authors focus on the role of CFO’s optional accruals through the presence and absence of incentive conflict. Introduction. The authors studied the earnings management and its manipulation techniquesRead MoreExploring The Earnings Management Techniques, Materiality Concept, And Ethical Judgments817 Words   |  4 PagesReporting by Financial Executives. The abstract demonstrates how the materially affects a code of ethics and follows with financial risks and fraudulent activities (p. 243). Introduction. The author studies the financial reporting, earnings management, and relationships with stakeholders. Over the years, Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) raised concerns on the reliability of financial reporting and fairness of earnings management. The reasonRead MoreEthics And Management : Ethical Considerations By Observers Of Earnings Management909 Words   |  4 PagesJudgments by Observers of Earnings Management. The abstract emphasizes that the earning management is the major ethical issues in accounting. Regulators and investors examine professional judgment through legal books (p. 285). Introduction. The author studies accounting methods, earnings management, and financial reporting to examine the ethicalness of judgments. Management’s ethics play a key role in earnings management activities and financial reporting. The researcher questions if the accounting professionRead MoreContemporary Issues Of Accounting : Take Home Final Exam1179 Words   |  5 Pagescookie jar reserves to smooth earnings by creating excessive reserves in good periods so that they can use them to offset losses in bad periods. In order to determine whether this practice is considered an ethical violation or not, an ethical decision model should be used. Graham Tucker offers five-question approach for ethical decision-making. The model can be used to examine and challenge a proposed decision in order to reach a clear decision. All of the five questions should be asked to considerRead MoreEssay Acct31021063 Words   |  5 PagesQuestion | ONE Accountants owe the duty to act in a professional and ethical manner concerning clients, as well an obligation to respect the laws that are involved with the profession. This is where a crossroads of ethics and legalities are formed and potentially the defining point of crucial decision-making. Stephen Richards and his actions under employment with Computer Associates (CA) are then examined in light of this concept. Accusations against Stephen Richards permitting the backdatingRead MoreFraud Cases have Put Earnings Management back in the Spotlight778 Words   |  3 PagesAlthough earnings management is not a new phenomenon, the emerging of the fraud cases such as Enron, Lehman Brothers, and other instances of financial fraud have again put this topic in the spotlight. Emerging concerns over earnings management have led to new disclosure requirements and the implementation of corporate good governance codes such as the Sarabanes Oxly Act (SOX), tabaksblat and other corporate good governance codes to reduce this phenomenon within firms. The role of financial reportingRead MoreThe Internal Assessment1233 Words   |  5 PagesThe Internal Assessment focuses on identifying and evaluating a firm’s strengths and weaknesses in the functional areas of business, including: management, marketing, finance, production, research and development, computer information systems. There are many subareas inside these functions, such as customer service, warranties, advertising, packaging, and pricing under marketing. The functional business areas differ for different types of organizations, such as hospitals, universities, government