Download or read book Earnings Management Constraints and the Use of Non GAAP Earnings Management written by Wenming Kang and published by . This book was released on 2015 with total page 101 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper attempts to shed light upon management choice to engage in earnings management beyond the bounds of Generally Acceptable Accounting Practice. I examine how limitations in accrual earnings management capabilities and unexpected variations in real earnings management can drive more prominent use in non-GAAP earnings management (NGEM). NGEM is approximated using restatements as result of irregularities and AAER enforcements. I have conducted my analyses in three stages. First, I examine a subsample of firms with high probability in engaging in NGEM and conduct a longitudinal analysis on the REM behavior of these firms leading to the period of high probability of restatement. I find that there is indeed more aggressive use of REM leading to the period of high probability of restatement. Next I examined whether firms with unexpected REM fluctuations and constrained AEM behavior are more likely to engage in NGEM behavior. I find weak evidence of constraints in AEM drives NGEM. Finally I examine whether the use of industry specialist auditors can help deter constrained AEM firms from resorting to the use of NGEM. I find no evidence suggesting industry specialist auditors can restrain the use of NGEM for firms with constrained AEM.

Download or read book The Relation Between Earnings Management and Non GAAP Reporting written by Ervin L. Black and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Managers have a variety of tools at their disposal to influence stakeholder perceptions. Earnings management and the strategic reporting of non-GAAP earnings are just two of the available menu choices. We explore how real earnings management and accruals management influence the probability that a company will disclose a non-GAAP adjusted earnings metric in its earnings press release and the likelihood that it will do so aggressively. We first investigate situations where managers already meet analysts' expectations either based on strong operating performance or after employing real and accruals management. We find that when solid operating performance alone allows firms to meet expectations, managers do not employ earnings management or non-GAAP reporting. However, when managers meet expectations using real and accruals management, they are significantly less likely to report a non-GAAP earnings metric. Next, we explore scenarios where companies fall short of expectations. We find that when they just miss expectations after managing GAAP earnings, they are significantly more likely to employ non-GAAP reporting, suggesting that the timing and relatively costless nature of non-GAAP reporting allows managers to appear to meet expectations on a non-GAAP basis when managed GAAP earnings fall short. Moreover, we find that companies are more likely to report non-GAAP earnings (and to do so aggressively) when (i) they are unable to use real or accruals earnings management, (ii) are constrained by prior-period accruals management, and (iii) their operating performance is poor. Taken together, our results are consistent with a substitute relation between non-GAAP reporting and both real and accruals management.

Download or read book Non GAAP Reporting and Accounting Restatement written by Shin-Rong Shiah-Hou and published by . This book was released on 2018 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, I examine whether disclosing Non-GAAP earnings is a signal of experiencing accounting restatement. I propose a scenario in which earnings are managed within the constraints of GAAP guidelines, as long as there is sufficient leeway to permit income-increasing accounting choices. Managers usually avoid issuing Non-GAAP earnings because of severe penalties. If this becomes no longer possible within GAAP earning management, managers have incentives to cross the line into Non-GAAP territory. At this point, disclosing Non-GAAP earnings is positively associated with accounting restatement because of the great magnitude of earnings management. I find that firms with restatements experience a significant increase in the relative use of disclosing Non-GAAP earnings with positive other exclusions. Firms with the positive other exclusions excluded from Non-GAAP earnings may exhibit increased likelihood of fraud or core-earnings restatement. Finally, firms disclosing Non-GAAP earnings and having high accounting complexity are more likely to restate than those disclosing Non-GAAP earnings and having low accounting complexity.

Download or read book Use of Non Financial Performance Measures in Managers Compensation Contracts as Earnings Management Constraints written by Mohamed Chakib Kolsi and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings management literature argues that managers' compensation contracts are based on Financial Performance Measures (FPM). Indeed, the accounting earnings have been the subject of several studies. A few of them have attempted to check whether to introduce the Non-Financial Performance Measures (NFPM) as a constraint on earnings management. The aim of this paper is to empirically test the impact of NFPM on earnings management behavior. Our sample consists of 89 Canadian listed firms pertaining to three sectors for the period, 1997-2006. The results are conclusive and showed that there is a negative relationship between Discretionary Accruals (DA) as a proxy for earning management and the relative importance of NFPM in managers' compensation contracts, suggesting that NFPM acts as an additional earnings management constraint.

Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.

Download or read book Principles of Accounting Volume 1 Financial Accounting written by Mitchell Franklin and published by . This book was released on 2019-04-11 with total page 1056 pages. Available in PDF, EPUB and Kindle. Book excerpt: The text and images in this book are in grayscale. A hardback color version is available. Search for ISBN 9781680922929. Principles of Accounting is designed to meet the scope and sequence requirements of a two-semester accounting course that covers the fundamentals of financial and managerial accounting. This book is specifically designed to appeal to both accounting and non-accounting majors, exposing students to the core concepts of accounting in familiar ways to build a strong foundation that can be applied across business fields. Each chapter opens with a relatable real-life scenario for today's college student. Thoughtfully designed examples are presented throughout each chapter, allowing students to build on emerging accounting knowledge. Concepts are further reinforced through applicable connections to more detailed business processes. Students are immersed in the "why" as well as the "how" aspects of accounting in order to reinforce concepts and promote comprehension over rote memorization.

Download or read book The Effect of Earnings Management Constraints on Management Earnings Forecasts written by Tze Yuan (David) Lau and published by . This book was released on 2016 with total page 430 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the role of earnings management constraints, as imposed by firms having higher-quality auditors and lower accounting flexibility at the beginning of the year, in managers’ ability to report less negative earnings surprises from their earnings forecasts. Earnings surprises from management earnings forecasts arise when firms’ realised earnings exceed or fall below the expected earnings of firms’ managers. This thesis argues that managers can report less negative earnings surprises through the use of two techniques: (1) upward earnings management (so that the realised earnings exceed the expected earnings); and (2) downward earnings expectation adjustments (so that the expected earnings fall below the realised earnings). Managers’ incentives to choose upward earnings management over downward earnings expectation adjustments decrease with the degree of earnings management constraints at year t-1. This thesis hypothesises that (1) ceteris paribus, firms with higher-quality auditors at year t-1 are more likely to use downward earnings expectation adjustments in order to report less negative earnings surprises for year t; and (2) ceteris paribus, firms with lower accounting flexibility at year t-1 are more likely to use downward earnings expectation adjustments in order to report less negative earnings surprises for year t. These hypotheses are tested in a unique economy, Japan, where nearly all firms’ managers provide earnings forecasts. Univariate and multivariate analyses of this thesis provide evidence that supports the following conclusions. First, managers of firms with higher-quality auditors and lower accounting flexibility at the beginning of the year are associated with less negative earnings surprises at the end of the year. Second, managers of firms with higher-quality auditors at the beginning of the year use downward earnings expectation adjustments, although the magnitude of these adjustments is lower than the adjustments by firms with lower-quality auditors at the beginning of the year. Third, managers of firms with lower accounting flexibility at the beginning of the year do not consistently use downward earnings expectation adjustments throughout the year to report less negative earnings surprises. Specifically, these firms are more likely to use downward earnings expectation adjustments at the second quarter of the year. Additional tests are conducted to analyse whether the main results are sensitive to alternative specifications of the model. The scope of these tests also extends to other quality aspects of management earnings forecasts and auditing, namely, forecast accuracy and auditor switching, respectively. Overall, these additional analyses indicate that the main results hold after the following empirical considerations are made: (1) self-selection bias; (2) alternative deflators for the response variables; and (3) alternative measures of audit quality and accounting flexibility. The analysis of forecast accuracy reveals that managers of firms with higher-quality auditors at the beginning of the year are more likely to issue accurate earnings forecasts. However, managers of firms with lower accounting flexibility at the beginning of the year are less likely to issue accurate earnings forecasts. The analysis of auditor switches shows firms that switch from lower-quality auditors to higher-quality auditors at the beginning of the year are more likely to report less negative earnings surprises.

Download or read book Dif an an uq q al ins n written by and published by . This book was released on 1995 with total page 372 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Accounting based Earnings Management and Real Activities Manipulation written by Wei Yu and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first essay, I examine the association between auditor industry specialization and earnings management choices. Prior research suggests that industry specialist auditors constrain accounting-based earnings management. But such actions may cause client companies to seek alternative means to manage earnings. Specifically, companies that hire industry specialist auditors may alter operating decisions to meet earnings targets, referred to as real activities manipulation. This essay investigates whether clients of industry specialist auditors that have an incentive to manage earnings are constrained from managing earnings through accruals manipulation and, therefore, are more likely to engage in real activities manipulation. Further, I examine whether operating performance declines for firms suspected of real activities manipulation. My findings indicate that clients of industry specialist auditors with incentives to manage earnings have lower absolute value of accruals relative to firms with incentives to manage earnings that do not hire industry specialist auditors. These clients of industry specialist auditors are also more likely to engage in real activities manipulation, suggesting this is a possible unintended consequence of hiring an industry specialist auditor. I also document evidence that firms suspected of real activities manipulation have lower future operating performance relative to firms not suspected of real activities manipulation.

Download or read book Earnings Management and Its Determinants written by Igor Goncharov and published by Peter Lang Pub Incorporated. This book was released on 2005-01 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent time a number of high-profile accounting scandals highlighted the problem of optimal allocation of savings to investment opportunities. To resolve this problem and to reduce damage caused to stakeholders of a company, it is important to understand the negative implications of earnings management and the conditions under which earnings management occurs. The study begins with the discussion of the earnings quality concept and the summary of prior evidence on the motivations for and the constraints of earnings management. The following empirical analyses shed some light on the effect of accounting standards and competing incentives on the level of earnings management.

Download or read book Earnings Management written by Kathleen Yates and published by Nova Science Publishers. This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings management is an issue that directly affects the overall integrity and quality of financial reporting and to date, many studies have been conducted in an attempt to gain an understanding of whether firms are engaging in earnings management, why they do so, what are the motives that drive managers' discretionary behaviour, what are the economic consequences and whether investors can see through this behaviour? In this book, Chapter One reviews the developments and the trends in the contemporary earnings management research and discuss several possible avenues for future research. Chapter Two provides an overview of the most recent studies on earnings management in relation to the financial crisis and the institutional environment and firm characteristics. Chapter Three provides a description of the nowadays most commonly used methods for measuring earnings management in accounting and finance literature. Chapter Four examines earnings management and corporate social responsibility as an entrenchment strategy.

Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?

Download or read book Detecting Earnings Management written by Gary Giroux and published by John Wiley & Sons. This book was released on 2004 with total page 344 pages. Available in PDF, EPUB and Kindle. Book excerpt: ESSENTIAL TOOLS AND STRATEGIES FOR DETECTING MANIPULATION. As recent corporate scandals prove, corrupt companies can maintain a façade of financial success through manipulation and fraud almost to the day they file for bankruptcy. Fortunately, tools exists to detect aggressive earnings management. This timely book reviews the current environment, explains the tools that can be used to detect a manipulative financial environment, and introduces techniques for recasting financial information to get a truer economic picture. Brief cases reflecting a variety of companies provide a feel for evaluating public data and how earning management potential can be analyzed. In addition, an appendix features a complete earnings management detection checklist that can be used to conduct a thorough analysis of any corporation. Detecting Earning Management will help readers: Identify the incentive of management to manipulate earning to promote their own short-term interests. Evaluate the effectiveness of corporate governance to limit short-term manipulation and promote long-term success. Consider whether recent regulations, such as Sarbanes-Oxley, will limit future abuse. Review the major fraud techniques used in the recent and not-so-recent scandals. Identify the potential areas of manipulation and other sources of distortion and develop appropriate detection strategies. Understand the challenging areas that can distort financial reality such as acquisitions, derivatives, and special purpose entities.

Download or read book Earnings Management written by Thomas E. McKee and published by Thomson South-Western. This book was released on 2005 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: Learn how to legally manage your earnings with EARNINGS MANAGEMENT! This finance text demystifies earnings management and provides you with 28 reasonable and legal techniques. Read this text and you will gain valuable knowledge about earning management concepts and tools and gain insight into the management decisions that can shape financial statements and the underlying quality of the earnings.

Download or read book Evidence on the Tradeoff Between Real Manipulation and Accrual Manipulation to 25 Pages 26 to 50 Pages 51 to 75 Pages 76 to 100 Pages 101 to 120 written by Amy Yunzhi Zang and published by ProQuest. This book was released on 2000 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book COSO Enterprise Risk Management written by Robert R. Moeller and published by John Wiley & Sons. This book was released on 2007-07-20 with total page 385 pages. Available in PDF, EPUB and Kindle. Book excerpt: Praise for COSO Enterprise Risk Management "COSO ERM is a thoughtful introduction to the challenges of risk management at the enterprise level and contains a wealth of information on dealing with it through the use of the COSO framework. Detailed procedures covering a wide variety of situations are followed by a thorough explanation of how each is deployed. As a project management professional, I appreciate how the author addresses the need for risk management at a project level. His background as someone who 'practices what they preach' and realizes the impact of the Sarbanes-Oxley auditing rules comes through clearly in the book, and it should be mandatory reading for anyone seeking to understand how to tackle their own ERM issues." --Greg Gomel, PMP, CQM, CSQE, ITIL, Director, Project Management, Insight North America "This volume clearly and comprehensively outlines the usefulness of COSO Enterprise Risk Management guidance. It should provide considerable benefit to those having governance responsibilities in this important area." --Curtis Verschoor, L & Q Research Professor, School of Accountancy and MISDePaul University, Chicago Transform your company's internal control function into a valuable strategic tool Today's companies are expected to manage a variety of risks that would have been unthinkable a decade ago. More than ever, it is vital to understand the dimensions of risk as well as how to best manage it to gain a competitive advantage. COSO Enterprise Risk Management clearly enables organizations of all types and sizes to understand and better manage their risk environments and make better decisions through use of the COSO ERM framework. A pragmatic guide for integrating ERM with COSO internal controls, this important book: Offers you expert advice on how to carry out internal control responsibilities more efficiently Updates you on the ins and outs of the COSO Report and its emergence as the new platform for understanding all aspects of risk in today's organization Shows you how an effective risk management program, following COSO ERM, can help your organization to better comply with the Sarbanes-Oxley Act Knowledgeably explains how to implement an effective ERM program COSO Enterprise Risk Management is the invaluable working resource that will show you how to identify risks, avoid pitfalls within your corporation, and keep it moving ahead of the competition.

Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.