Managing Earnings Financial reporting relies on ethical, accurate, and structured information to relay the economic present and future economic position of an organization. Accounting is a function of economics, measurement error, and bias (Baginski, Bradshaw, & Wahlen, 2015). There is a gray area regarding management and ethics. Often managers have different opinions of what is ethical and unethical, particularly with manager earnings. For example, a manager thinks shipping early to reach an earnings goal is ethical. The ethical boundaries are important and should be standardized, because when management manipulation is used to drive up profit reporting, there are long-term consequences.
Managing Short-Term Earnings
Accounting provides …show more content…
Regardless of the method used to manage earnings, when they are deployed to influence the earnings of an organization synthetically, one is practicing unethical management. The survey responses indicate mangers are more acceptable of increasing short-term earnings by selling excess assets or using overtime (Baginski, Bradshaw, Wahlen, 2015). I have worked within a company that used over-time as an earnings manipulation tactic. The employees lose because they have to work longer hours and the customers lose because they pay higher labor costs for the products. Additionally, the employees are frustrated because they feel that management misgauged the workload and in response, the employees suffer from working longer hours. The accounting or earnings statements look good for the short-term, but the long-term effects significantly outweigh the short-term …show more content…
Regardless of the size, type, timing or reason for the unethical management practices, the tolerance must be high to resist the temptation of manipulating earnings. The long-term management has the opportunity to comply with legal and ethical guidelines. Therefore, creating a consistent and respectable culture that builds the trust, integrity and loyalty of employees and investors. In my experience, companies that manipulate their short-term earnings rarely succeed in the long-term. Either the managers that were overstepping their boundaries are replaced or the company goes out of business. The financial statements, management process and company longevity rely on ethical business processes. After reviewing the gray areas of manipulation in the article, a leader should address the areas of concern and create the policy for management to
Managing Short-Term Earnings
Accounting provides …show more content…
Regardless of the method used to manage earnings, when they are deployed to influence the earnings of an organization synthetically, one is practicing unethical management. The survey responses indicate mangers are more acceptable of increasing short-term earnings by selling excess assets or using overtime (Baginski, Bradshaw, Wahlen, 2015). I have worked within a company that used over-time as an earnings manipulation tactic. The employees lose because they have to work longer hours and the customers lose because they pay higher labor costs for the products. Additionally, the employees are frustrated because they feel that management misgauged the workload and in response, the employees suffer from working longer hours. The accounting or earnings statements look good for the short-term, but the long-term effects significantly outweigh the short-term …show more content…
Regardless of the size, type, timing or reason for the unethical management practices, the tolerance must be high to resist the temptation of manipulating earnings. The long-term management has the opportunity to comply with legal and ethical guidelines. Therefore, creating a consistent and respectable culture that builds the trust, integrity and loyalty of employees and investors. In my experience, companies that manipulate their short-term earnings rarely succeed in the long-term. Either the managers that were overstepping their boundaries are replaced or the company goes out of business. The financial statements, management process and company longevity rely on ethical business processes. After reviewing the gray areas of manipulation in the article, a leader should address the areas of concern and create the policy for management to