Exploring The Earnings Management Techniques, Materiality Concept, And Ethical Judgments

817 Words Oct 18th, 2015 4 Pages
Article #6
Abstract. The article reviewed was Effects of Materiality, Risk, and Ethical Perceptions on Fraudulent Reporting by Financial Executives. The abstract demonstrates how the materially affects a code of ethics and follows with financial risks and fraudulent activities (p. 243).
Introduction. The author studies the financial reporting, earnings management, and relationships with stakeholders. Over the years, Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) raised concerns on the reliability of financial reporting and fairness of earnings management. The reason of accounting wrongdoings is materiality. The author states the management rationally and intentionally misrepresents financial statements, misleads investors, and commits the fraud for the personal gain. The main objective of the study is to analyze the earnings management techniques, materiality concept, and ethical judgments (pp. 243-244). The study is important due its hypotheses and findings on the ethical decision-making. The author considers two problems: consequences of ethical decisions and impact of materiality on earnings management.
Literature Review. The author uses a systematic review of literature in the research. The researcher examines the study of Healy and Wahlen (1999), Kaplan (2001), Fischer and Rosenzweig (1995), Libby and Kinney (2000) to analyze to concept of earnings and its forecast, motives to manipulate with earnings, perceptions of…
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