EARNINGS MANAGEMENT AND FRAUD

1
EARNINGS MANAGEMENT AND FRAUD

• ACCT 310

2
WHY?

• To raise Fund
• To meet debt covenants
• To affect stock price
• To maximize mgts compensation
• To lower political pressure

3
HOW?

• Accounting estimate change
• Accounting method change
• Controlling transactions
• Fraud

4
RELATED THEORIES

• Efficient market theory
• Income smoothing
• Cookie jar theory
• Big bath theory

5
INDEPENDENT AUDITINGSARBANES OXLEY ACT