Manipulation of Accounts

Many “accounting” scandals have cast some doubts about the truthfulness of the financial statements. After reviewing broadly some theoretical aspects of the question, noticeably the transfer of wealth potentially resulting from an incorrect assessment of the market value of the firm, we look at the principal currents of research in this domain. Firstly we consider researches on Earnings management interested mainly by the level of actual accruals to be compared with a level of “normal” accruals obtained from a predictive model. Another approach consists in estimating thresholds in the distribution of revenues below which the managers will not want to go back. We also look at income smoothing, identified by a variation in the profit inferior to the variation of the sales, or, more simply, to predict a trend expected by the market and see if the profit figure will fall within this limit. Big bath accounting is simply the cleaning of the balance sheet after a change of CEO, for instance. Finally, we look at other approaches to accounts manipulation like those called window dressing or creative accounting , nearer from the professional way of thinking.

Accounting information system · Accrual · Balance sheet · Business · Creative accounting · Earnings · Earnings before interest and taxes · Earnings Management · Econometrics · Economics · Financial accounting · Microeconomics · Principal (computer security) · Profit (economics) · Revenue · Revenue recognition · Smoothing · Statistics · Accounting · Accounting Theory and Financial Reporting · Auditing, Earnings Management, Governance · Computer Science · Financial Reporting and Valuation Research · Mathematics

• Earnings management to avoid earnings decreases and losses

  Open Access•David Burgstahler, Ilia Dichev et al.•Journal of Accounting and Economics•1997

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• The effect of bonus schemes on accounting decisions

  Open Access•Paul M Healy•Journal of Accounting and Economics•1985

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