EARNINGS MANAGEMENT

Earnings Management

(a)

Earnings management behaviour has been concern in the accounting profession for a long time. Managing income arise from the conduct-GAAP flexibility and the court from managers to select reporting methods, measurement and disclosure, which correspond to the basic economics of the firm. Using the solution, however, gives an opportunity to achieve the desired level of earnings.

Management claims that they are working corporation to the continuous improvement of operating performance, consistently and reliably increase the financial return and long-term growth of capital. These are made under high pressure. Sometimes they need to smooth income in the sustainable growth of the corporation. Parfet (2000) argued that the flexibility and options are acceptable and necessary and were good for economic development. Others believe that flexibility is necessary because different industries have different requirements and accounting changes are occurring faster than the FASB can answer (Paul, 2003).

However, it is believed that there is too much flexibility and options accounting. Too much depreciation assessment methods and methods of inventory evaluation provided an opportunity for managing earnings. Both managers and incentive to choose the method that will achieve a certain level of income. In addition, too many options can provide information overload and can make the user feel confused. From the accounting professional point of view, too many options to make accounting and auditing training is too expensive.

There are many factors that affect the management of evaluation and select the accounting treatment. There are many factors that influence the actions of managers to manage earnings. Some researchers have suggested that there was a link between corporate ethical values and earnings management. Prior empirical studies surveyed Certified Public Accountants (CPAs) in public accounting, industry and academia to determine whether there is a link between corporate ethical values and perceptions of management of earnings. Selected earnings management scenarios were sent to respondents.

The results showed that CPAs employed in organizations with high (low) ethical standards are seen as revenue management more unethical (ethical). In-group analysis of the respondents also found significant differences in the perception of corporate ethical values based on gender, age, position and other demographic factors. The results showed that there were early warning signals in the accounting profession in respect of ethical values and earnings management. The results were particularly alarming among CPAs employed in industry who reported lower perception of their corporate ethical values. The authors believe that there is a strong relationship between ethics and revenue management. Earnings management related to misleading financial information to investors.

The intention of the Manager's income is associated with their ethics. If they have a strong sense of ethics, they will not manage earnings. Their faith value will not allow them to manage earnings. No one can force them to do it if they do not intend to manage earnings. Consider the position of manager's impact on his assessment of the feasibility of accounting. Using a theory of justice, Kaplan (2001) suggested that the different exchange relationships with the organization will affect the ...