Earning Management

4188 words 17 pages
Does the Commercial Banking Industry of UAE Practice Earnings Management

Dr. Mohammed Obeidat

It is the right of external users of accounting information to be provided with more adequate information to protect their interests. Many questionable issues concerning the term of earnings management are still available. Auditors, accountants, financial analysts, and other concerned parties may hold the responsibility of detecting external users from the practices of earnings management. Many questionable issues are still available regarding the term of earnings management. Some people may have no enough idea about what practices are classified under earnings management, and what practices can not be classified under this term.
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Moreover, this definition states that the practice of earnings management phenomenon leads to users' misstatement. In other words, practitioners of earnings management have different purposes and they change some accounting numbers to affect users in order to achieve these objectives. Healy and Wahlen (1999) state that earnings management "occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company or to influence contractual outcomes that depend on reporting accounting numbers". This definition states that this practice is also intentional and purposeful. This definition mentions that contractual issues are incentives for managers to manage earnings. But we have to remember Some concerned people believe that earnings management mean upward manipulation. Actually, earnings management may be exercised either upward or downward. In most cases, the target of earnings determines to a large degree, whether the management of the firm practices earnings management upward or downward. Some people also believe that the all the practice of earnings management are illegal, and no legal practice exists. Actually, there are different practices of earnings management do not violate the generally accepted


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