Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality


Master's Thesis, 2019

75 Pages

Anonymous


Abstract or Introduction

This paper delves into various theories and approaches, aiming to define and differentiate earnings management from related concepts such as fraud, expectation management, and impression management. It explores the goals and incentives driving earnings management, including maximizing or minimizing earnings, beating targets, and smoothing.

At the onset of the new millennium, corporate scandals rocked the business world, eroding trust in management, boards of directors, and the accounting profession. In response, regulations and policies aimed at enhancing corporate governance and financial reporting were swiftly implemented.

The credibility, clarity, and consistency of financial reporting practices play a pivotal role in enabling investors to make informed decisions. Accurate and fair financial performance representations, as opposed to inflated and misleading figures, are essential for market players, including shareholders and creditors. Investors rely on audited financial reports to guide their investment decisions, underscoring the critical importance of accuracy and reliability in publicly available financial disclosures.

Auditors, by reducing the risk of material misstatement, ensure the integrity of the information disclosed in a company's financial statements. Management, with the goal of achieving promised targets and ensuring the company's existence, may engage in earnings management as a strategic contribution to corporate policy.

Financial reporting serves as a means to distinguish well-performing companies from their counterparts, facilitating efficient resource allocation and empowering stakeholders to make effective decisions. The disclosed earnings results significantly impact a firm's overall business activities and management decisions, particularly in satisfying analysts' expectations, which can influence equity value.

While accounting standards play a role, the quality of financial statements is more influenced by company-specific and institutional factors shaping managers' incentives. These factors lead to financial reporting practices being viewed as the outcome of a cost-benefit assessment.

Details

Title
Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality
College
University of Duisburg-Essen
Course
Master Thesis
Year
2019
Pages
75
Catalog Number
V1441741
ISBN (eBook)
9783964875952
ISBN (Book)
9783964875969
Language
English
Keywords
Earnings management, Fraud, Expectation management, Impression management, Corporate governance, Financial reporting, Accounting standards, Auditors, Stakeholders, Corporate scandals
Quote paper
Anonymous, 2019, Earnings Management. The Influence of Real and Accrual-Based Earnings Management on Earnings Quality, Munich, GRIN Verlag, https://www.grin.com/document/1441741

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