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Earnings Management: the Continuum from Legitimacy to Fraud - Research Paper Example
Are you going to conduct your fraudulent actions and operations in your business? Maybe it is better for you to make fraudulent actions and to cheat you CEOs? Of course, the answer to these questions should be negative…
Earnings Management: the Continuum from Legitimacy to Fraud
To focus on the basic concepts and to clearly be aware of the essence of the concepts is the first and foremost step in research development. Schram and Shank (2006) underline that it is very important to identify one concept and separate it clearly from another one. Patton (2002) makes an emphasis on a potential interpretation of key concepts, i.e. we should first identify "fraud" and then pay our attention to "legitimacy". Therefore, we should follow the ideas of bright minds and wise heads of the researchers and believe into their claims that concepts identification is very important in the process of our further research. What is the real meaning of the concept of "fraud"? On the one hand, it is not very easy to identify this concept and very often it is used beyond the context of economy. It is possible to identify the concept of "fraud" in the following way: the way an accountant or a financial manager or any other party involved in the earnings management is involved in the process of cheating, then it is possible to talk about a possible occurrence of fraud. It is very easy to understand and discuss the concept of fraud in relation to earnings management and refer to it as to cheating the process of gains management of a certain financial entity.
Enron case study is a perfect example of the necessity to avoid fraud in earnings management. The accountants were driven into temptation of hiding real figures in the financial statements of the company and Enron lost its money. ...