Earnings Management Practices

Please prepare a response to the following post:

Earnings management is the practice of using accounting techniques to generate financial statements that reflect an excessively optimistic image of a company's economic activity and financial situation. Many accounting rules and principles need management to make decisions in order to follow these concepts. results management exploits the way accounting standards are implemented to produce financial statements that exaggerate results. Management uses several ways to manipulate financial statements and one of the ways moving earnings from one reporting period to another to portray a better picture is one sort of earnings management, as is altering the balance sheet to hide liabilities and inflate earnings.

I do believe companies should take into consideration the following of AS 2401 consideration of fraud in a financial statement audit and establish a strong internal control that can prevent and detect errors or frauds that can mislead the financial statements.

For Public entities, Quarterly reports are very vital in supplementing and enhancing internal controls to prevent unethical earning management. We are talking about regular communication with the Board of Directors and Audit Committee to discuss any updates on the 10Q and 10K and help to reflect and review the right earning results of the Company.