earnings management
January 2nd, 2023
As instructed by your customer service specialist, I am notifying that I want to be assigned the same writer as my previous order #26875. Below are 3 essay prompts. I need one essay that covers the requirements of all 3 prompts which are effectively asking the same thing with only small nuances. Attached are 4 sources (2 academic “articles to be used” and 2 investopedia pages defining key concepts of earnings management and earnings quality) that MUST be used. The readings from these 4 sources have to be cleverly woven into an answer to the common denominators of the prompts with a thesis (first paragraph), development and conclusion. Please note I’d like one whole paper not 3 separate ones or 1 split into 3 prompts. Prompt 1 – In his much publicised 1998 speech, the former chairman of the Security and Exchange Commission (SEC), Arthur Levitt stated: ‘Lastly, companies try to boost earnings by manipulating the recognition of revenue. Think about a bottle of fine wine. You would not pop the cork on that bottle before it was ready. But some companies are doing this with the revenue … ‘ (Levitt, A., ‘The numbers game’, The CPA Journal, December 1998, p.18.) Discuss this statement in the context of the current standards for revenue recognition and the relevant literature, critically evaluating the ‘bottle of wine’ metaphor. Provide examples of prevalent forms of revenue management. Prompt 2 – In the concluding section of Graham, Harvey and Rajgopal (2006), the authors state (p. 38): ‘The findings of our survey on financial reporting practices are startling (…) and ironic. (…) A one percent value haircut probably costs the economy more like $150 billion—the equivalent of two Enrons.’ What findings are the authors referring to? Why are those findings ‘startling and ironic’? What do the authors mean by ‘a one percent value haircut’? Discuss the findings in Graham, Harvey and Rajgopal (2006) in the context of the relevant literature. Prompt 3 – Two recent accounting graduates are engaged in a heated discussion about earnings quality. According to the first student: ‘Earnings quality is a rather useless construct because we can neither define it nor measure it accurately.’ The second student disagrees: ‘Earnings quality is a rather useful construct: it helps us detect earnings management. Whenever I see a company with low-earnings quality, I know that the management is engaging in some sort of earnings manipulation.’ Join the debate and discuss the students’ statements in the context of the relevant literature on earnings quality. Guide the students by providing them with arguments as to why their statements may be correct or incorrect. On average, has the quality of firms’ earnings increased or decreased over time? What could explain such a change? I will order 1 more essay if this one is successful.
