Earnings Management -An Overview

Earnings management is a financial reporting phenomenon which is used by managers to mask the true financial results of the company that stakeholders ought to know. Earnings management activities have their roots in agency conflict between managers and external shareholders in a firm. Continuous development and growth of capital market has allured the foreign investors to invest their funds in India. Corporate collapses are badly deteriorating actual and potential investors trust on Indian capital market. Hence, there is a strong need to build the reputation of Indian economy at international level. This can be achieved by presenting true and fair picture of financial reports which ensures the absence of manipulated and misleading figures in financial statements. Earnings management provides base for opportunistic acts done by managers which in future may turn out to be a fraud. Hence, it is necessary to know the foundation of such frauds so that this could be controlled. In this direction, the present book tries to gives an overview of earnings management concept, motives, restrictive tools.