How Do Restatements Begin? Evidence of Earnings Management Preceding Restated Financial Reports

被引:98
作者
Ettredge, Michael [1 ]
Scholz, Susan [1 ]
Smith, Kevin R. [1 ]
Sun, Lili [2 ]
机构
[1] Univ Kansas, Lawrence, KS 66045 USA
[2] Univ N Texas, Denton, TX 76203 USA
关键词
earnings management; fraud; restatements; real activity earnings management; AUDITOR INDEPENDENCE; NONAUDIT SERVICES; BALANCE-SHEET; DEBT; MANIPULATION;
D O I
10.1111/j.1468-5957.2010.02199.x
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
Most earnings restatements are blamed on error, or misunderstanding of GAAP, but suspicion persists that many of these restatements are instead due to intentional earnings management. We analyze balance sheet bloat, or unusually high levels of working capital account balances, for evidence of sustained, income-increasing earnings management prior to initial non-GAAP financial reports. We establish a pattern of systematically increasing balance sheet bloat for firms later issuing clearly fraudulent financial reports. Next, we compare bloat for apparently non-fraud restatements to fraud and control samples. We find non-fraud restatement companies' bloat is higher than control companies for two years preceding the initial misstated financial report. But, these firms accumulate less balance sheet bloat than companies with restatements clearly involving fraud. This suggests meaningful, but not pervasive, earnings management underlying even apparently non-fraudulent restatements. We extend our analysis to discretionary accruals and real activity earnings management.
引用
收藏
页码:332 / 355
页数:24
相关论文
共 46 条
[1]  
Argenti J., 1976, Corporate collapse: The causes and symptoms
[2]   Do nonaudit services compromise auditor independence? Further evidence [J].
Ashbaugh, H ;
LaFond, R ;
Mayhew, BW .
ACCOUNTING REVIEW, 2003, 78 (03) :611-639
[3]   The balance sheet as an earnings management constraint [J].
Barton, J ;
Simko, PJ .
ACCOUNTING REVIEW, 2002, 77 :1-27
[4]   The rewards to meeting or beating earnings expectations [J].
Bartov, E ;
Givoly, D ;
Hayn, C .
JOURNAL OF ACCOUNTING & ECONOMICS, 2002, 33 (02) :173-204
[5]   The effects of debt contracting on voluntary accounting method changes [J].
Beatty, A ;
Weber, J .
ACCOUNTING REVIEW, 2003, 78 (01) :119-142
[6]   Earnings management to avoid earnings decreases and losses [J].
Burgstahler, D ;
Dichev, I .
JOURNAL OF ACCOUNTING & ECONOMICS, 1997, 24 (01) :99-126
[7]  
CHEN KCW, 1993, ACCOUNT REV, V68, P218
[8]   War and Peace Possible Approaches to Reducing Intergroup Conflict [J].
Cohen, Taya R. ;
Insko, Chester A. .
PERSPECTIVES ON PSYCHOLOGICAL SCIENCE, 2008, 3 (02) :87-93
[9]  
Dechow P.M., 1996, Contemporary Accounting Research, V13, P1, DOI DOI 10.1111/J.1911-3846.1996.TB00489.X
[10]   Discussion of the balance sheet as an earnings management constraint [J].
DeFond, ML .
ACCOUNTING REVIEW, 2002, 77 :29-33