Earning Management - Essay Example

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This essay describes earning management refers to a common practice by many accountants and companies to manage the recorded earning. The main idea behind the practice is to manipulate the company’s records on the income statement to reflect a rather positive financial standing…
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Download file to see previous pages In addition, key defense in the financial management is full disclosure. This implies that if all the information available for positional analysis of a company is available and true, analysts are able to provide timely and effective advisory information for a company. However, when a company decides to provide fraudulent information to gain investors’ preference and stakeholders favors, the companies end up being overwhelmed with deceptive information and at last lose the very thing they have been fighting to win (Temte, 2005). To increase the quality of financial reporting and hence the credibility of the information contained therein, there must be some ethical consideration. This implies that it is unethical for any company to intentionally and inappropriately conceal information that would change the financial image of a company.  Further, honesty has always been considered the best policy, especially in business. Companies that undertake earning management are doing nothing less than dishonesty. The use of deferring maintenance to post positive image does not mean that the deferred activities are not to be undertaken. What happens is that the deferred activities will I the long run cost the company a fortune (Vataliya, 2009). And since the company made investors and analysts believe that it is doing well financially through fraudulent data, then the company loses all that it has sought to save. The investors and stakeholders, therefore, feel deceived and that a company they have depended on has been dishonest. ...Download file to see next pagesRead More
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