From the course: Accounting Foundations: Internal Controls
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The earnings management continuum
From the course: Accounting Foundations: Internal Controls
The earnings management continuum
- Techniques to manage earnings range across a broad continuum. from seemingly inconsequential timing issues to outright fraud. A company can imperceptibly slide from intelligent transaction timing to unquestionably fraudulent deception in its attempts to report the most attractive earnings possible. The same flexibility that allows accountants to use professional judgment to produce financial statements that accurately portray a company's financial condition also allows desperate managers to manipulate the reported numbers. Now not all earnings management schemes are created equal. Here's something we call the Earnings Management Continuum. Let's start with strategic matching. Through awareness of the benefits of consistently meeting earnings targets or reporting a stable income stream, a company can make extra efforts to ensure that certain key transactions are completed quickly or delayed in order for them to be…
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