What method of earnings management is following the feasibility of GAAP and without committing the fraud...

What method of earnings management is following the feasibility of GAAP and without committing the fraud for the selling software product company?

Expert Solution

Earnings management becomes fraud when companies intentionally provide materially misstated information.Earnings management includes selecting GAAP methods with concern for appearance rather than reality. It also includes subtle techniques such as changing reported earnings through “performance timing.”

Although there is a thin line between earnings management and fraud, the difference between them must be clearly identified. Brown (1999) and Erickson, Hanlon & Maydew (2006) state that earnings management is normally within the scope of GAAP but fraud is outside the GAAP boundaries. However, this two matters share the same objective. He also stated that in the US situation, management teams will avoid any discussion about this matter and even try to keep away from linking these two concepts. Even though earnings management and fraud have a difference in terms of the action, these two matters have the same effect on the financial report.

ekkarill92 answered 1 year ago

Differentiate between earnings management and fraud.

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what is earnings management

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Search the internet, find and discuss 1 examples of accounting scandal/fraud related to earnings management;

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