Introduction Accounting ethics are critical since creditors, stakeholders, investors, and other stakeholders rely on financial statements. One example of possibly unethical accounting procedures is earnings management. This occurs when a company modifies its financial reporting to seem to have a better financial situation than it really has. The goal of this earnings management strategy is to keep the share price stable by creating the image of ongoing profits and flattening earnings. The company's management team decides whether to manage earnings to meet analyst estimates or to improve its accounting methods to boost profitability. Following several financial scandals over the years, the issue of management ethics has grown in importance. Pressures from creditors, stakeholders, and other important parties impacted by a company's financial status have increased the necessity of making ethical decisions. Financial statement preparers who violate the accounting profession's ethical standards do it because they feel it is important for the success of their clients' businesses. Accounting ethical issues have resulted in the failure and closure of various companies. Ethical Situation Evaluation Earnings management strategies vary, but they often include profit-driven decisions, skewed accounting judgements, and changing accounting standards. Management takes decisions only to enhance profits in an earnings-oriented strategy[ CITATION Car05 \l 1033 ]. Accrual accounting may be used to modify outcomes using inaccurate accounting judgments, but this requires management to make difficult decisions. Earnings management may be utilized when a company's management picks an alternative accounting standard to meet predicted profit figures since the standards for accounting the same transactions vary across the United States.
Fraud occurs when a firm intentionally exposes materially inaccurate information to increase revenues. Earnings management raises several ethical issues when firms strive to meet financial objectives such as predictions, budgets, and more. Profit manipulation attempts that go beyond widely accepted accounting norms are unethical[ CITATION Car05 \l 1033 ]. Profit management is a contentious subject since it may lead to unethical decisions by management. It all comes down to whether they are acting correctly or concealing something else. The failure to disclose critical information is one of the most prevalent ethical difficulties in financial statements. Investors may make educated judgments based on the information supplied when a firm implements full disclosure. Except for corporate secrets, which must be maintained within[ CITATION Car05 \l 1033 ]. In a financial contract, for example, it is necessary to supply the reader with significant financial account information. Bad outcomes are often disclosed only after the non-disclosure period has passed. Sharing information is an important aspect of running a company that should never be disregarded. Shareholder and investor pressure to enhance profits is the primary cause of unethical earnings management. Managers may be inclined to break ethical rules if their remuneration is contingent on fulfilling such forecasts, or if shareholders put pressure on them to do so. Managers in a less ethical organizational culture handled earnings unethically as compared to managers in a more ethical environment, indicating that decisions made at the top of many firms had an influence.
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