Ethical Concerns of Managing Short-Term Earnings

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Short Term Gains, Long Term Effects The article, "The Dangerous Morality of Managing Earnings" explores ethical concerns about the management of earnings. The article makes some generalizations about managers and the reporting of short term earnings. Among them are: Reducing earnings is viewed more favorably than increasing earnings. Changing or manipulating operating procedures or decisions to boost short term earnings is viewed more favorably than manipulating accounting methods to achieve the same results. Short-term management of earnings is considered more acceptable if the effect is small. Short-term management of earnings is more acceptable if effect is on quarterly earnings than if the effect is on annual earnings. Selling excess assets or using overtime is a more acceptable practice than increasing profits by offering extended credit terms. (Bruns, 1990) Seventy Nine Percent of those surveyed asserted that it was ethical to change or manipulate operating procedures or decisions if the effect was a reduction of earnings. Only 57% believed this was ethical if the effect was an increase of earnings. One corporate controller admitted to paying overtime and shipping on a Saturday in an effort to increase sales. (Bruns, 1990) Managers who engage in practices that boost short-term earnings are often acting in accordance with the laws. However, they are not looking at the effects their actions have on the financial reports. This, in essence, ignores the needs of
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