Earnings Management Abuse

Recently, we reviewed an article from the American Accounting Association, titled, “The Numbers Game”. The article, discussed the recent trend of companies becoming more concerned with meeting or exceeding their earnings estimates and less concerned with truth and reality. Mr. Levitt began by addressing the problem of ‘earnings management’, where the financial statements of a corporation are manipulated to meet the predicted earnings expectations for that period. The pressure in recent years to meet these expectations has grown tremendously with adverse affects in the public’s percepti...