Discussion
One of the most controversial topics to affect the accounting profession has been that of earnings management. Companies try to manage their earnings to match analysts' projections. There is no formal definition of "earnings management," nor a sole source for its ethical use. This process has recently come under criticism by both auditors and statement readers.
Using both the required text and external resources, address the questions provided below. Responses should be unique and incorporate your personal perspectives that are supported by reading and research. Initial comments should be 1-2 paragraphs in length for each point. Follow-up postings should not exceed a paragraph and should add additional information or perspective to the original author's comments.
Companies use earnings management to smooth out fluctuations in earnings and/or to meet stock analysts' earnings projections. Large fluctuations in income and expenses may be a normal part of a company's operations, but the changes may alarm investors who prefer to see stability and growth, tempting managers to take advantage of accounting gimmicks. Also, a company's stock price will often rise or fall after an earnings announcement, depending on whether it meets, exceeds or falls short of expectations.
Is earnings management the same thing as financial statement fraud? Does earnings management have a legitimate place in financial reporting?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.