Generalizations in This Study With Research Proposal

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It is simply not reasonable for a manager to push the sale of a surplus asset back by multiple years.

However, managers can influence earnings through their choice of accounting policies. While the choice of policies is allowable under GAAP, when different companies in the same industry use different policies, this can reduce the degree of comparability between the statements, negating one of the key benefits of having the GAAP system.

Ultimately, management does hold the power to influence how the firm conducts its financial accounting. In addition to dictating the type of accounting policies the firm has, management also creates the ethical culture of the firm. Most of the cases of accounting fraud in the past decade were heavily influenced by the ethical culture that management created.

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The results -- notably in firms like Tyco or Enron -- have been grossly inflated earnings. However, while one does not expect to see examples so egregious with any frequency, more subtle examples can occur.

One way in which ethical lapses can compound given a particular culture bred by management can be found with the examples of short-term earnings manipulation. Managers can essentially conduct short-term earnings manipulation over the long haul. If a manager pulls earnings from the following quarter to make the immediate quarter look better, that same manage may find themselves doing it again the following quarter to the detriment of the subsequent quarter. This could easily create a chain of minor breaches that when totaled equate to a major, long-run….....

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