Academic journal article Journal of the International Academy for Case Studies

Earnings Management and Ethical Challenges at the Succulent Cooking Inc.-A Case Study

Academic journal article Journal of the International Academy for Case Studies

Earnings Management and Ethical Challenges at the Succulent Cooking Inc.-A Case Study

Article excerpt

CASE DESCRIPTION

The primary subject matter of this case is earnings management that often takes place in financial reporting for business enterprise and ethical issues involved therein. It demonstrates to students that reported accounting earnings can be managed by seemly innocent actions such as increasing production and building up inventories. This case will expand students ' understanding of the motivation of earnings management and raise their awareness of ethical issues involved in financial reporting for business enterprise. The case is appropriate for the second course in managerial accounting at the undergraduate level or similar courses at the graduate level. It can also be used in advanced level financial accounting courses or in auditing seminar on contemporary accounting issues. The case requires approximately three hours of outside preparation by students to arrive at reasonable solutions. The case could then be debriefed in class using calculations and discussions. This would require one class hour.

CASE SYNOPSIS

Earnings management occurs when firm management attempts to alter reported earnings for reasons other than objective reporting of firm performance. This opportunistic behavior is motivated by managers who seek job security and/or financial rewards. It is in direct violation of professional ethical standards and, in many cases, could be in violation of law. …

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