Reported earnings or actual earnings Essay Example | Topics and Well Written Essays - 2750 words

Reported recompense or actual earnings - Essay ExampleCompanies employ accountants to make financial reports. Thus, from the perspective of accounting, what can we say on the occurrence? Are accountants being used by banks to misstate caller-out profits? On a link up point, how do we assess the earning management techniques with regard to their potential to be used by companies to understate company profits? In relation to the said issues, what do the professional ethics for accountants require for accounting professionals on the matter? What are some of the relevant literature on the issue? II. Literature review round of the relevant materials on the subject matter being addressed by this work were the works of mitre joint and Rodrigue (2002), Turner and Wheatley (2003), Laux (2003), and Lev (2003). Mitra and Rodrigue (2002, p. 185) defined earnings management as managements intentional and opportunistic exercise of financial reports for personal gain. According to Mitra and Rodriguqe (2002, p. ... 185) clarified that earnings management does not always a negative connotation because management whitethorn have implemented an earnings management to provide a conservative or more realistic earning figures based on the GAAP or Generally accept Accounting Principles. Mitra and Rodrigue explained (2002, p. 185) that opportunistic behaviour arise from earnings management because it is empirically difficult to differentiate earnings management that is opportunistic from what is done in the interest of a conservative portrayal of the company situation. The Mitra and Rodrigue (2002, p. 185) mind is that management or researchers generally take an opportunistic perspective in view of the difficulty of separating authoritative from what is illegitimate in earnings management. Turner and Wheatley (2003, p. 61) acknowledged that current accounting principles, auditing standards, and SEC reporting regulations get managers to implement an inappropriate earnings m anagement. To support their claim, the authors identified 34 companies that published financial misstatements simply which also corrected the misstatements a year later (Turner and Wheatley 2003, p. 61). According to the authors, management subsequent correction of discriminating control over the creation of a misstatement benefits a company just as a misstatement may have been deliberately made in the interest of the company. The authors narrated that the Financial Executives Research Foundation reported that the procedure of companies restating published financial statements due to an error were high than earlier figures the figure of 464 for the 3-year period 1998-2000 for the United States was higher than the earlier 10-year period (Turner and Wheatley 2003, p. 61). Turner and