Financial scandals in the 21st century confirm the existence of earnings management practices, even in audited financial statements of publicly traded companies, misleading investors and other financial statement users. Executives of these companies are under constant pressure to meet or beat the expectations of Wall Street, providing incentive to manipulate financial results through the use of estimates or reserves. Finance and accounting professionals are charged with an obligation to use professional judgment in the preparation of financial statements to ensure that they fairly represent the financial results of the company.
Locate an academic peer-reviewed or professional accounting and finance journal article in the Cybrary that examines the earnings management issue and how it relates to latitude in accounting decision making allowed under current financial accounting standards. Provide a brief synopsis of the article that discusses earnings management and the relationship between accounting latitude and representative financial statements. Be sure to provide a reference citation in APA format so that others can find your article in the Cycbrary to learn more. Provide a hypothetical example of the potential impact of earnings management on a large and well-known company should the executive team decide to purposely manipulate estimates and reserves used in financial statement preparation that present results in the most favorable light possible. Share your views about the use of estimates and reserves in financial statements.
In your own words, post a substantive response to the Discussion Board question(s) and comment on other postings. Your response should address the DB question(s) and move the conversation forward. You will be graded on the quality of your postings, including mastery of the concept as well as critical thinking. If asked for your opinion, do not simply state that it is a good or bad idea; elaborate on your reasons and argument. Include enough detail to substantiate your thinking as well as your position on the questions or comments.
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