Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 19

Who is responsible for earnings management? Is it top management that instigates the practice? Or, is it the accountants who may go along with recording and reporting such transactions? Or, is it the auditors that do not discover or look the other way and ignore the effects of the transactions on the financial statements? Be sure to discuss the ethical obligations of each group in answering the question?

Step 1 of 2

Ethics:

Ethics in the accounting profession is defined as guidelines and principles. It includes laws and standards of behavior.

Earning management:

Earning management is defined as inflate and deflate in artificially revenue and earnings of the organization. It’s accomplished in two broad ways:

1. To achieve the desired goal alter the elements of estimates.

2. Capitalized the cost that should be expensed using an aggressive accounting technique.