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The Continuum between Legitimacy and Fraud - Research Paper Example

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The Continuum between Legitimacy and Fraud

This essay discusses that Shawver, an Associate Professor of Accounting at King’s College, and Clements, a Professor of Accounting at Florida Southern College, are trying to explain the effect of emotion on ethical evaluations of earnings manipulation. In the accounting context, it is evident that there some emotional interplay between the evaluation of earnings manipulation. This is because the perpetrator of the manipulation is usually an accountant, and the person investigating the manipulation is also an accountant. The authors state that prior research suggested that emotions might shape the ethical evaluation and decisions made by an individual, therefore, the research goes on to explore the emotion that an accountant might feel when evaluating earnings management.Yang, a Professor of Science and Technology, Lai and Tan, Professors of Accounting, try to determine the relationship between ownership structure of firms and the types of earnings management. The authors classify insiders as part of a firm’s executives in their research, and from this, determine that the quality of earnings management is affected by discretionary accruals. Specifically, the accruals in the firm fluctuate with executive ownership, indicating that that equity stakes by top members of a firm should be reduced in order to reduce agency costs and relationships. This ensures that the earnings reflected by management are less fraudulent that in other firms that do not have top executives in top-tier management positions....
Female Directors and Earnings Management in High-Technology Firms. Pacific Accounting Review, Vol. 24(1). Pp. 4-32. Gavious and Yosef, Professors of Management, and Segev, the Department of Social Work specialist, wrote this paper to try to explain the effect of the presence of female members in the board of directors and the audit committee. This study was aimed at finding the relation between female directors and the continuum between legitimacy and fraud in earnings management. The study indicates that there is a negative relation between the presence of female directors and earnings management, and that there is always a higher firm value when female representation is higher in higher positions of a firm. The authors quote the moral values of the different genders in supporting this argument, social stereotypes and the women’s motivation and sense of achievement. Ho, J. L., Liu, C. & Ouyang, B. (2012). Bloated Balance Sheet, Earnings Management, and Forecast Guidance. Review of Accounting and Finance, Vol. 11(2). Pp. 120-140. In this paper, the authors, all of them being Professors of Accounting, try to postulate Barton and Simko’s argument that balance sheet information usually acts as a constraint on accrual-based earnings management in a firm. The authors do this by examining the effect of the balance sheet constraint on the manager’s tendency to use either downward forecast or earnings management to avoid downfalls in earnings. The authors find that in cases where the operating assets are higher than average sales, the analyst is likely to provide downward trends of forecasts. In contrast, in cases where there is abnormal increase in production costs and reduction in expenses, the analyst is likely to engage in legal earnings management. This paper ...Show more


The paper discusses the fact that there is a very small distinction between legitimate management practices that are aimed at meeting financial forecasts and fraudulent activities. The paper goes on to state that, in some instances, managing earnings to conform to forecasts is not illegal…
Author : runolfsdottirne
The Continuum between Legitimacy and Fraud essay example
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