Ethics and Managing Earnings

When reviewing the information gathered in “The Dangerous Morality of Managing Earnings,” there are five generalizations in how to manage short term earnings. They are how managers manipulate records to benefit themselves or the company. It seems that there is no true uniformity in short term earnings and each felt that rules could be bent by manipulating operating procedures, accounting methods, deferring expenditures, budget target, or by changing the short term earnings in sales and expense was justifiable. Although manipulation may not be a result of intentional fraud, it is interpretations of the accounting rules and aggressive operating activities; thus creating a lack in ethical judgment on behalf of the manager. This makes a manager look to be an opportunist and/or selfish to make his department look as though it is doing better than it really is. In this study, opportunist were looked at to be more unethical than a manager who was aiming to increase the organizations contracting efficiency. Each manager had a different outlook as to the ethics of how they would manipulate the financial books by using short term earnings to correct issues they were having now or what they wanted before the end of year. In manipulating the short term earnings managers did not evaluate the effect it could have on the company, consumers, business partners or shareholders for the future. By using manipulation for quarterly sales or yearend forecast, it creates a long term effect on the company. If sales are not where they are supposed to be they use short term earnings for overtime to boost shipments which adds additional expenses. These expenses continue into the next year which makes the company fall short of financial goals. If this practice continues every quarter in order to meet company goals it could make the difference between the company having an aggressive operating practice versus committing financial fraud.
Also, if earnings management defers

References: Burns, W.J, Merchant, K.A. (2012) The Dangerous Morality of Managing Earnings, retrieved on November 11, 2012, from http://www.personal.psu.edu/sjh11/ACCTG211/HuddartCoursepacketSPRING2009/BrunsMerchant.pdf Gibson, C.H. (2011) Financial Reporting & Analysis, 12th Ed, South-Western Cengage, Mason: OH, p. 80