This course provides an overview of earnings management techniques and their ethical implications. This course covers basics like revenue recognition timing, expense manipulation, provision adjustments, income smoothing, and cost-cutting. This course also addresses more advanced methods such as financial engineering, tax planning, big bath accounting, accounting policy changes, and round-trip transactions. Throughout this course, the ethical considerations inherent in these techniques are addressed through a series of example situations.
Chapter 1 covers key earnings management method such as revenue recognition timing, expense manipulation, provision and reserve manipulation (e.g., cookie jar reserves), asset valuation adjustments, income smoothing, and cost-cutting timing. It provides a foundation for identifying basic earnings management practices and their impact on financial statements.
Chapter 2 covers advanced earnings management strategies such as financial engineering, tax planning, big bath accounting, changes in accounting policies, and round-trip transactions. Each of these methods are discussed, along with hypothetical examples illustrating their application.
Learning Objectives
- Identify different methods of revenue recognition timing used in earnings management.
- Recognize examples of expense manipulation in financial reporting.
- Discover and distinguish between provision and reserve manipulation techniques.
- Discover and determine the impact of asset valuation adjustments on reported financial performance.
- Explore and differentiate between income smoothing strategies and their effects on financial statements.
- Identify financial engineering techniques in advanced earnings management.
- Discover and distinguish legitimate tax planning from earnings management strategies.
- Explore and determine the impact of big bath accounting on financial reporting.
- Identify and differentiate permissible changes in accounting policies from manipulative adjustments.
- Recognize risks associated with round-trip transactions in earnings management.
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Prerequisites
No advanced preparation or prerequisites are required for this course.
Education Provider Information
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