Do Models of Discretionary Accruals Detect Actual Cases of Fraudulent and Restated Earnings? An Empirical Evaluation PDF Download

Author: Keith L. Jones
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
We examine the association between the existence and the magnitude of a fraudulent event that overstated earnings, non-fraudulent restatements of financial statements, and nine competing models of discretionary accruals, accrual estimation errors (Dechow and Dichev 2002 and McNichols 2002), and the Beneish (1997 and 1999) M-score. We use the size of the downward earnings restatement following the discovery of the fraud to proxy for the degree of discretion exercised to perpetrate the fraud. We find that the accrual estimation errors exhibit the strongest association with the existence and the magnitude of fraud and non-fraud restatements. Further, our results suggest that total accruals could be a low-cost alternative to many commonly used measures of discretionary accruals in detecting smaller fraud. The accrual estimation errors have incremental explanatory power over total accruals for both smaller and larger frauds.

Author: Rafay, Abdul
Publisher: IGI Global
ISBN:
Category : Business & Economics
Languages : en
Pages : 414

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Book Description
In today's interconnected world, fraud and corruption threaten the integrity of global financial systems, making illicit and illegitimate finance a pressing concern across industries. Editor Abdul Rafay, an esteemed academic scholar in financial crimes, corporate finance, and financial technology, offers the definitive solution to the Theory and Practice of Illegitimate Finance. This premier reference work comprehensively explores all facets of illicit finance, providing invaluable insights and real-world case studies on financial crimes, money laundering, tax evasion, and fraudulent practices. Through meticulous research and analysis, the book equips business owners, policymakers, researchers, and industry professionals with strategies to combat and prevent illicit finance from infiltrating financial institutions and businesses. As an indispensable resource for academicians and students, Theory and Practice of Illegitimate Finance empowers readers to tackle the complexities of illicit finance. Abdul Rafay's unparalleled expertise, evident from his successful editing of previous books and numerous research papers, enhances the book's credibility. By embracing the transformative journey offered by the book's insights, readers from all walks of life can contribute to a more transparent and accountable financial world, ensuring the integrity of global finance systems and paving the way for a brighter and more secure future.

Author: Bruno Maria Franceschetti
Publisher: Springer
ISBN: 3319541218
Category : Business & Economics
Languages : en
Pages : 168

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This book approaches the question of the relation between financial crises and earnings management from two philosophical perspectives: positivism and critical realism. The results obtained using the positivist approach indicate that financial crises tend to have no consistent effect on earnings quality since managers’ earnings behavior does not differ from the pre-crisis to the crisis period. The author accordingly argues against the existence of a causal law based on a constant conjunction model (i.e., whenever a financial crisis happens, earnings management occurs) and concludes that financial crises cannot be seen as the cause of earnings management. The critical realism perspective, on the other hand, casts light on managers’ reasons for acting like an earnings manager; in conjunction with the more traditional positivist approach, it assists in refuting the idea of financial crises as a generative mechanism for earnings management. The author concludes by exploring other structures at work that might be responsible for earnings management. This book will be of interest to both academics and a wide range of professionals.

Author: John Hasseldine
Publisher: Emerald Group Publishing
ISBN: 1787149609
Category : Business & Economics
Languages : en
Pages : 289

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Book Description
Tax researchers have an important role to play in conducting and publishing rigorous quality research in the uncertain times facing the world’s tax systems. There are many research questions to be addressed, and Advances in Taxation invites submissions on a broad range of tax topics.

Author: Sabri Boubaker
Publisher: Edward Elgar Publishing
ISBN: 1788110005
Category : Business & Economics
Languages : en
Pages : 521

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Book Description
The triple bottom line is an accounting framework with social, environmental and financial factors. This Handbook examines the nexus between these areas by scrutinising aspects of socially responsible investment, finance and sustainable development, corporate socially responsible banking firms, the stock returns of sustainable firms, green bonds and sustainable financial instruments.

Author: Stewart Jones
Publisher: Routledge
ISBN: 1135107262
Category : Business & Economics
Languages : en
Pages : 559

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Book Description
Financial accounting theory has numerous practical applications and policy implications, for instance, international accounting standard setters are increasingly relying on theoretical accounting concepts in the creation of new standards; and corporate regulators are increasingly turning to various conceptual frameworks of accounting to guide regulation and the interpretation of accounting practices. The global financial crisis has also led to a new found appreciation of the social, economic and political importance of accounting concepts generally and corporate financial reporting in particular. For instance, the fundamentals of capital market theory (i.e. market efficiency) and measurement theory (i.e. fair value) have received widespread public and regulatory attention. This comprehensive, authoritative volume provides a prestige reference work which offers students, academics, regulators and practitioners a valuable resource containing the current scholarship and practice in the established field of financial accounting theory.

Author: Wayne R. Guay
Publisher:
ISBN:
Category :
Languages : en
Pages :

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GAAP provides management with discretion over accounting accruals. Management might use the discretion to improve earnings as a measure of firm performance, or engage in opportunistic management of discretionary accruals. Empirical research on accrual management requires a model to identify discretionary accruals. We assess the effectiveness of alternative discretionary-accrual models using expected relations between stock returns and earnings components under the performance-measure and opportunistic-management-of-accruals hypotheses. None of the five models examined in the paper is effective in isolating discretionary accruals. We find that the discretionary-accrual models randomly decompose earnings into discretionary and nondiscretionary components.

Author: Panagiotis E. Petrakis
Publisher: Springer Nature
ISBN: 303160721X
Category :
Languages : en
Pages : 524

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Author: Eli Bartov
Publisher:
ISBN:
Category :
Languages : en
Pages : 41

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Book Description
The primary objective of this study is to evaluate empirically the ability of two cross-sectional models, the Cross-Sectional Jones Model and the Cross-Sectional Modified Jones Model, to detect earnings management vis-a-vis their time-series counterparts. The motivation follows because these two cross-sectional models have not been formally evaluated by prior research, and because their use offers substantial advantages to investors and researchers over their time-series counterparts. A secondary objective is to assess the robustness of findings of prior studies assessing discretionary-accruals models using our new sample and research method, which controls for potential research confounds. The evaluation involves examining the association between discretionary accruals and audit qualifications, using a sample of 166 distinct firms with qualified audit reports and a matched-pair control sample with clean audit reports. An association between large discretionary accruals generated by a model and an audit qualification provides evidence on the ability of the model to detect earnings management. Results from univariate tests that do not control for potential research confounds show that all models, except the DeAngelo Model, are consistently successful in discriminating between firms that manage earnings. Once potential research confounds are controlled, however, only the two cross-sectional models are able to detect earnings management. This last result, which highlights the importance of controlling for research confounds in earnings management studies using carefully selected samples, implies that the cross-sectional models are superior to their time-series counterparts. This finding is particularly important for future earnings management research because using a cross-sectional model rather than its time-series counterpart should result in a larger sample size that is less subject to a survivorship bias, and will also allow examining samples of firms with short history.

Author: Patricia M. Dechow
Publisher: Research Foundation of the Institute of Chartered Financial Analysts
ISBN: 9780943205687
Category : Corporate profits
Languages : en
Pages : 152

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