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Management: The continuum from legitimacy to fraud - Research Paper Example

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Management: The continuum from legitimacy to fraud

..9 Brief Review of the Literature……………………..…………………………………...11 Summary………………..………………………………………………….……18 Research Method…………………………..…………………………………….……...18 Operational Definition of Variables…………………………..……………;…...20 Measurement of Variables…………….…………..…………………….………20 . Summary……………….………………………………………………..……….24 References………………………….………………………………………..…………..25 Appendices.…………………………………….……………………..…………………26 Introduction Earnings management is defined as reasonable and proper practices that are part of a well-managed business that delivers value to shareholders. On the other hand also, it may constitute fraud, which is an intentional deliberate misstatement or omission of material facts or accounting data which is misleading, and when considered with all the information made available would cause the reader to alter or change his or her judgment or decision. An earnings management is at the legal end of a continuum while financial fraud is at the illegal end. Fraud violates the main acknowledged accounting values. Virtually all administrative activities comprise a potential outcome on earnings, in that logic encompasses earnings management; if not, the activities most probably would not take place. Hence, earnings management, in general implies, conversely, that the actions that are reached are intended either to even earnings over more provisional or yearly accounting periods. It is designated to achieve a targeted wages level, conceivably to meet up and analyze the securities forecast as (Fischer & Rosensweig, 1995 quoted in Farag & Elias, 2012, p.185). While such actions are not per se specifically violations of the Generally Accepted Accounting Principles (GAAP), they may impact adversely on the accuracy of the information that may be drawn from financial statements. Two important elements that are identified by the definition are inextricably linked to the concept of earnings management – specifically, consequences and intent (Farag & Elias, 2012). The necessary outcome of the actions is that the parties relying on the standards financial analysis procedures to gain information from the financial statements are misled as a direct consequence of these actions. The actions are also motivated by the clear intent by management to portray the business in a more favourable light, in a manner that is contrary to the moral or ethical standards to which the business management and the accounting professionals involved should be held. Ronen and Yaari (2007) defined earnings management as fraudulent activity that involves manipulation of companies’ financial statemen ...Show more

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Earnings Management: The Continuum from Legitimacy to Fraud Concept Paper Submitted to Northcentral University Graduate Faculty of the School of Business and Technology Management in Partial Fulfillment of the Requirements for the Degree of DOCTOR OF PHILOSOPHY BUSINESS ADMINISTRATION By Ifeanyi David Onyekwena Prescott Valley, Arizona October 2013 Table of Contents Introduction ………………………………………………….………………………….3 Statement of the Problem.……….…………….……………………………….4 Purpose of the Study…………………….………
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