6. Implies manager not penalized for non-core charges, such as writedowns, provisions for restructuring.
7.
8.
9.
10. Accept responsibility for confirm that the auditors receive the necessary cooperation from management to carry out their duties in accordance with the strengthened auditing standards to be developed by the ASB.And the last one is to quot;
make sure investors' expectations are based on reasonable assumptions. If they are not, you need to do a better job of communicating the underlying realities of your business. If their expectations are reasonable and you miss the target, that's just a fact of life that you have to explain and you should have to explain it, not cover it over.quot;
<br />Conclusion<br />In the literature review we had many definitions of earnings management. Generally, it can be defined as misrepresentation of finanacial reports in order to either mislead shareholders or affect contractual outcomes depended on reports. Moreover, motives for managers to manage earnings were mentioned in this paper like explicit contract such as bonus plans, and debt covenants, implicit contract, capital markets and need for external financing, the political and regulatory process, and some specific circumstances such as earnings decreases or losses. Earnings management is a manager’s choice of accounting policies that achieves some specific objective. Even under GAAP, managers still retain some flexibility in accounting policy selection that may be able to positively impact their personal satisfaction and/or the market value of their firm. <br />Is Earnings Management “Good” or “Bad”?<br />Earnings management is “badquot;
, in the sense that it reduces the reliability of financial statement reports. Managers change reported earnings for reasons that are not clear. Howeves, there is a dependence on earnings management to translate inside information into public information, as the costs of uncovering inside information are often very high. <br />Earnings management does have a “good” side, fortunately. This relates to efficient contracting. When a contract imposes strict or incomplete terms on a manger, earnings management can provide an option of flexibility, so long as it excludes a manager’s opportunistic (self-interested) motivations. <br />Additionally, earnings management can serve as a way to “unblock” communication to outsiders. Blocked communication exists when it is very difficult and costly to translate a manger’s skilful expertise about a firm to the board of directors and/or investors. By using the financial statements to communicate the financial health of the firm, earnings management can be used to inform outsiders of management’s inside information as per their exercised expertise. Earnings management that makes the company look better than it really is may result in disappointing for the single investor and potentially leads to a welfare loss in society when the resource allocation is distorted. A more specific knowledge of occurrence of earnings management supposedly increases the awareness of the investor and thus leads to better investments and increased welfare. Therefore, earnings management can entail both bad and good consequences for both external and internal side of a company depending on how they use and implement it.<br />References<br />Ethics & Earnings Management, Leon Timmermans, 2010<br />Earnings Management, Scot, 2009<br />EARNINGS MANAGEMENT, FRAUD, AND COMPENSATION, MICHAEL GOMBOLA, PH.D., March 2008<br />Earnings management, S. Verbruggen, J. Christaens, and K. Milis, 2008<br />A Different Perspective of Earnings Management, Ning Yaping, 2006<br />Perspectives of Earnings Management, C. Kevin Pan, 2006<br />An Investigation of Earnings Management through Marketing Actions, Craig J. Chapman Thomas J. Steenburgh, July 2010<br />Earnings Mangement, Jonas Sophr, 2005<br />Earnings management and investor protection, Christian Leuz, Dhananjay Nanda, Peter D. Wysocki, 2002<br />ACCOUNTING SUBJECTIVITY AND EARNINGS MANAGEMENT, William U. Parfet<br /> Surplus Free Cash Flow, Earnings Management and Audit Committee, RINA BR BUKIT AND TAKIAH MOHD ISKANDAR, 2009<br />The Theoretical Framework of Earnings Management, Ning Yaping, 2005<br />CEO incentives and earnings management, Daniel Bergstresser, Thomas Philippon, 2004<br />Earnings Management and Firm Performance, GUOJIN GONG, HENOCK LOUIS, AMY X. SUN<br />Earnings Management by Firms, Levon Babalyan, 2004<br />INCOME SMOOTHING, REAL EARNINGS MANAGEMENT AND LONG-RUN STOCK RETURNS, Abbas Aflatooni, Zahra Nikbakht, 2009<br />