A History Of Earnings Management - 1624 Words

A History of Earnings Management, Financial Scandals, and the Resulting Legislations At the turn of the 21st century, America found itself wrought with multiple financial scandals. The poor decisions of just a few executives resulted in thousands of people out of a job, pension funds wiped away, and houses going back to the bank. While earnings management was certainly not a new concept nor was the resulting fraud, the high number of scandals within a short period of time brought it front and center. The resulting public outcry forced congress to swiftly pass new legislations to finally control these manipulations. The business world was forever changed, but has earnings manipulation truly been eliminated? WHAT IS EARNINGS MANAGEMENT? While there doesn’t seem to be one generally accepted definition, most people agree to an extent on what earnings management entails. Gary Giroux explains it as â€Å"operating and discretionary accounting methods to adjust earnings to a desired outcome,† while another set of authors describe it as â€Å"a conscious effort to manipulate earnings for one’s advantage† (Giroux 180; qtd. in Grasso, Tilley, White 46). Earnings management covers a broad field of practices, both positive and negative. The negative side is more specifically referred to as earnings manipulation. Giroux gives the definition of earnings manipulation as the â€Å"opportunistic use of earnings management to effectively misstate earnings to benefit managers† (Giroux, 180). Most of theShow MoreRelatedLong Distance Discount Services ( Ldds )1460 Words   |  6 PagesWorldcom Group, formally known as Long Distance Discount Services (LDDS) and the secon d largest long distance telecommunications provider in the U.S., was involved in one of the biggest accounting frauds in history. 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