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Author: Sarah E. McVay
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
This paper examines the classification of items within the income statement as an earnings management tool. Evidence is consistent with managers opportunistically shifting expenses from core expenses (cost of goods sold and selling, general, and administrative expenses) to special items. This vertical movement of expenses does not change bottom-line earnings, but overstates core earnings. In addition, it appears that managers use this earnings management tool to meet the analyst forecast earnings benchmark, as special items tend to be excluded from both pro forma and analyst earnings definitions.
Author: Sarah E. McVay
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
This paper examines the classification of items within the income statement as an earnings management tool. Evidence is consistent with managers opportunistically shifting expenses from core expenses (cost of goods sold and selling, general, and administrative expenses) to special items. This vertical movement of expenses does not change bottom-line earnings, but overstates core earnings. In addition, it appears that managers use this earnings management tool to meet the analyst forecast earnings benchmark, as special items tend to be excluded from both pro forma and analyst earnings definitions.
Author: Xudong (Daniel) Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 10
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Book Description
This paper examines whether the passage of the Sarbanes-Oxley Act (thereafter, SOX) curbs firms' earnings management behavior through shifting core expenses to special items. The passage of SOX could be an effective deterrent to misclassification activities as it aims to prevent accounting fraud and limit management misbehavior, imposing significant legal liabilities and stiffer penalties on managers for aggressive financial reporting. Alternatively, because classification shifting does not affect reported net income, thereby is less likely to be detected and associated with lower litigation risk, it is likely to be used as a substitute for accruals-based earnings management and therefore experiences an increasing trend in the post-SOX period. Using a sample period from 1988 to 2010, I find evidence consistent with the deterrent effect, that is, the magnitude of unexpected core earnings declines and firms shift fewer core expenses to special items after the passage of the SOX of 2002. My study adds to the literature on the impact of SOX on earnings management by finding that SOX is effective in curbing classification shifting between core earnings and special items, a form of earnings management that misrepresents components of earnings but has no effect on the bottom line income.
Author: 高祖祥
Publisher:
ISBN:
Category :
Languages : en
Pages : 63
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Book Description
Author: Malek El Diri
Publisher: Springer
ISBN: 3319626868
Category : Business & Economics
Languages : en
Pages : 120
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Book Description
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.
Author: Accounting Standards Board
Publisher:
ISBN:
Category : Accounting
Languages : en
Pages : 66
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Book Description
Author: Yinghong Zhang
Publisher:
ISBN:
Category : Business Administration/Accounting
Languages : en
Pages :
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Book Description
Business Administration/Accounting
Author: Joshua Ronen
Publisher: Springer Science & Business Media
ISBN: 0387257713
Category : Business & Economics
Languages : en
Pages : 587
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Book Description
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?
Author: Xudong (Daniel) Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 50
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Book Description
Prior research has intensively debated whether abnormal audit fees purely indicate audit effort or client-auditor economic bonding (Francis 2011). However, this empirical debate is mostly based on the findings of the associations between audit fees and accrual-based earnings management. Unlike accrual-based earnings management, earnings management through classification shifting does not change the bottom-line numbers and thus involves lower litigation costs. Given the difference in litigation costs between the two forms of earnings management, the effect of abnormal audit fees on the incentives of auditor in dealing with the behavior of earnings management could be different. It is thus interesting to examine how audit fees affect auditors' incentives on their clients' earnings management with potential lower litigation risks.Using data from years 2000-2010, we find a significant and positive cross-sectional association between the magnitude of abnormal audit fees and the level of classification shifting, a result supporting the notion that greater abnormal audit fees allow for more earnings management through classification shifting. This observed result further indicates that using abnormal audit fees to purely measure audit effort or economic bonding might be questionable as the effect of abnormal audit fees on opportunistic accounting practices could differ, depending on the specific form of earnings management activities associated with the level of potential litigation costs.
Author: Amy Yunzhi Zang
Publisher: ProQuest
ISBN: 9780549163251
Category :
Languages : en
Pages : 120
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Book Description
Author: Baruch Lev
Publisher: John Wiley & Sons
ISBN: 1119191084
Category : Business & Economics
Languages : en
Pages : 268
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Book Description
An innovative new valuation framework with truly useful economic indicators The End of Accounting and the Path Forward for Investors and Managers shows how the ubiquitous financial reports have become useless in capital market decisions and lays out an actionable alternative. Based on a comprehensive, large-sample empirical analysis, this book reports financial documents' continuous deterioration in relevance to investors' decisions. An enlightening discussion details the reasons why accounting is losing relevance in today's market, backed by numerous examples with real-world impact. Beyond simply identifying the problem, this report offers a solution—the Value Creation Report—and demonstrates its utility in key industries. New indicators focus on strategy and execution to identify and evaluate a company's true value-creating resources for a more up-to-date approach to critical investment decision-making. While entire industries have come to rely on financial reports for vital information, these documents are flawed and insufficient when it comes to the way investors and lenders work in the current economic climate. This book demonstrates an alternative, giving you a new framework for more informed decision making. Discover a new, comprehensive system of economic indicators Focus on strategic, value-creating resources in company valuation Learn how traditional financial documents are quickly losing their utility Find a path forward with actionable, up-to-date information Major corporate decisions, such as restructuring and M&A, are predicated on financial indicators of profitability and asset/liabilities values. These documents move mountains, so what happens if they're based on faulty indicators that fail to show the true value of the company? The End of Accounting and the Path Forward for Investors and Managers shows you the reality and offers a new blueprint for more accurate valuation.
