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This chapter investigates whether earnings management activities increase the likelihood of receiving a qualified audit report. We have carried out this study with a sample of Spanish companies for the period 2001–2009. Previous research on the issue is not only scarce but also suffers from methodological pitfalls. In all cases, researchers have followed a matched sample approach without considering the implications of such approach for the statistical analysis. Despite its great popularity among researchers in accounting, the use of matched-based sampling is susceptible to produce technical errors in the statistical analysis. The main problem consists in the generalization of results obtained with a nonrandom sample to the whole population of firms. Our results do not show a significant relationship between EM and qualified audit reports. We have also addressed whether the international financial crisis has affected our results and concluded that Spanish companies seem to have used EM during the crisis to push down earnings, probably expecting to take advantage of the positive earnings surprises during the postcrisis period. Nevertheless, the financial crisis has not changed the nature of the EM-qualified opinions relationship.

The use of models for detecting earnings management in the academic literature, using accrual and real manipulation, is commonplace. The purpose of the current study is to compare the power of these models in a United Kingdom (UK) sample of 19,424 firm-year observations during the period 1991–2018. The authors include artificially-induced manipulation of revenues and expenses between zero and ten percent of total assets to random samples of 500 firm-year observations within the full sample. The authors use two alternative samples, one with no reversal of manipulation (sample 1) and one with reversal in the following year (sample 2).

The authors include artificially induced manipulation of revenues and expenses between zero and ten percent of total assets to random samples of 500 firm-year observations within the full sample.

The authors find that real earnings manipulation models have lower power than accrual earnings manipulation models, when manipulating discretionary expenses and revenues. Furthermore, the real earnings manipulation model to detect overproduction has high misspecification, resulting in artificially inflating the power of the model. The authors examine an alternative model to detect discretionary expense manipulation that generates higher power than the Roychowdhury (2006) model. Modified real manipulation models (Srivastava, 2019) are used as robustness and the authors find these to be more misspecified in some cases but less in others. The authors extend the analysis to a setting in which earnings management is known to occur, i.e. around benchmark-beating and find consistent evidence of accrual and some forms of real manipulation in this sample using all models examined.

This study contributes to the literature by providing evidence of misspecification of currently used models to detect real accounts manipulation.

Based on the findings, the authors recommend caution in interpreting any findings when using these models in future research.

The findings address the earnings management literature, guided by the agency theory.

This study aims to identify and compare the measurement models of earnings management (EM) appropriate to the Iranian Islamic banking system. The importance of reported profit figures has motivated business executives, who also perform financial reporting, to manipulate these figures. These measures are referred to as “earnings management,” which negatively influence the quality of reported earnings and financial statements' reliability.

In this study, four methods, namely, Jones (1991), modified Jones (Dechow et al., 1995), Kasznik (1999) and Kothari et al. (2005), were used to measure the EM index in 25 Iranian Islamic banks (IBs) registered with the Tehran Stock Exchange and/or the Central Bank of Iran. The study covered the period 2005–2020. Following the aforementioned methods, this research implemented templates that were repeatedly tested in subsequent studies using accruals to discover EM.

The results show that the Kasznik (1999) model is the preferred and compatible model with the Iranian Islamic banking system's accrual behaviour due to the consistency of the measurement coefficients with theoretical and previous research findings. Therefore, total accruals, including discretionary accruals and non-discretionary accruals, have the most correspondence with (1) property, machinery and equipment; (2) the change in cash flow from operating activities; and (3) the difference of change in revenue (ΔREV) and change in net receivable accounts (ΔREC).

This is the first investigation in the Iranian Islamic banking system. The research contributes to the Iranian Islamic banking system literature on the implements of EM, which could be appealed to in the context of developing countries like Iran. Finally, this study highlights the different EM capabilities in Islamic banking systems similar to the Iranian banking arrangement.

This paper aims to respond to recent calls by Jones (2014) and Jones and Solomon (Accounting, Auditing & Accountability Journal, 2013) for more studies on biodiversity accounting and reporting. In particular, this paper explores biodiversity reporting of the Murray-Darling Basin Authority (MDBA), an Australian public sector enterprise.

The paper uses content analysis of MDBA’s published annual reports over the period of 15 years (1998-2012). Archival data (from different government departments) are also used to prepare natural inventory model.

The paper finds that although specific species, such as flora and fauna, and habitats-related disclosures have increased over the time, such information still allows only a partial construction of an inventory of natural assets, using Jones’ (1996, 2003) model. However, unlike prior studies that find lack of data availability to be the main impediment for operationalising biodiversity accounting, the abundance of biodiversity data in Australia makes it comparatively easier to produce such a statement.

Informed by the environmental stewardship framework, the results of this paper suggest that the disclosures made by MDBA are constrained potentially due to its use of traditional accounting mechanisms of reporting that only allow tradable items to be reported to stakeholders. An alternative reporting format would be more relevant to stakeholder groups who are more interested in information regarding quality and availability of water, and loss of biodiversity in the basin area rather than the financial performance of the MDBA.

Although there are a growing number of studies exploring biodiversity reporting in Australia, this paper is one of the earlier attempts to operationalise biodiversity (particularly habitats, flora and fauna) within the context of an Australian public sector enterprise.

This study examines whether Brazilian health insurance companies (HICs) engage in earnings management through discretionary accruals or operational decisions by refraining from reporting a low indicator of sustainability in the market (IDSM).

The study used the Jones and Modified Jones models to identify earnings management through discretionary accruals and used the model described by Roychowdhury to estimate the abnormal behaviors of operational decisions. Data covering 2012 to 2018 were collected from the ANS website.

The results show that HICs engaged in earnings management to avoid reporting a low IDSM. The findings should help health insurance clients make decisions regarding the purchase or change of health insurance. The findings should also encourage regulators to improve their evaluation of the economic and financial risks around HICs.

The National Agency of Supplementary Health (ANS) established a qualification program for HICs, monitoring them based on a set of indicators. Managers may have an incentive to use earnings management to obtain indices that meet the requirements of the ANS qualification program in order to avoid showing signs of abnormality.

本研究旨在探討巴西的醫療保險公司，透過避免報導低的市場可持續性指標，是以裁決性應計，抑或是以操作決策來進行盈餘管理。

國立輔助醫療辦事處 (註：此為直譯)(The National Agency of Supplementary Health)為醫療保險公司建立了一個資格檢定機制，基於一套指標來監管這些公司。公司主管或會有鼓勵性的誘因去使用盈餘管理來取得符合國立輔助醫療辦事處資格檢定機制所要求的指標，從而避免顯示異常的跡象。

本研究使用Jones 模型及Modified Jones模型，透過裁決性應計來辨認盈餘管理，研究亦使用羅伊喬杜里 (Roychowdhury) 描述的模型， 來估計操作決策的異常行為。數據取自國立輔助醫療辦事處的網址，並涵蓋2012年至2018年期間。

研究結果顯示，醫療保險公司進行盈餘管理，以求避免報導低的市場可持續性指標。研究結果應可幫助醫療保險客戶在購買或更改醫療保險時作適當的決定。研究結果亦可鼓勵監管者改善他們對醫療保險公司的經濟及財務風險所作的評估。

The paper seeks to evaluate the prescriptive value of ethical decision‐making models.

The paper explores various types of models in the ethics literature in concert with knowledge from the decision sciences literature to develop a tentative list of evaluative criteria that might be applied to prescriptive models. It then applies these criteria to one prescriptive model from the ethics literature, developed by Petrick and Quinn, in an attempt to demonstrate the value of more comprehensive evaluation. It closes by considering future research aimed at the evaluation of ethical decision‐making models as well as research needed to validate the Petrick and Quinn model.

This critique finds that the Petrick‐Quinn judgment integrity model satisfies most of the criteria discussed in the ethical decision‐making literature. The primary opportunities for refining the Petrick‐Quinn model as a prescriptive framework for ethical decision making are: articulating the operational judgment component of the model as a formal, quantitative decision analysis, and conducting research to assess the real‐world utility of the model.

While there has been a proliferation of research concerning business ethics, little attention has been focused on evaluating the utility of ethical decision‐making models. Accordingly, this paper advances theory, research and practice regarding ethical decision making in organizations.

Accounts manipulation has been the subject of research, discussion and even controversy in several countries including the USA, Canada, the U.K., Australia, Finland and France. The objective of this paper is to provide a comprehensive review of the literature and propose a conceptual framework for accounts manipulation. This framework is based on the possibility of wealth transfer between the different stake‐holders, and in practice, the target of the manipulation appears generally to be the earnings per share and the debt/equity ratio. The paper also describes the different actors involved and their potential gains and losses. We review the literature on the various techniques of accounts manipulation: earnings management, income smoothing, big bath accounting, creative accounting, and window‐dressing. The various definitions of all these, the main motivations behind their application and the research methodologies used are all examined. This study reveals that all the above techniques have common elements, but there are also important differences between them.

Reconstructability analysis (RA) is a method for detecting and analyzing the structure of multivariate categorical data. While Jones and his colleagues extended the original variable‐based formulation of RA to encompass models defined in terms of system states, their focus was the analysis and approximation of real‐valued functions. In this paper, we separate two ideas that Jones had merged together: the “g to k” transformation and state‐based modeling. We relate the idea of state‐based modeling to established variable‐based RA concepts and methods, including structure lattices, search strategies, metrics of model quality, and the statistical evaluation of model fit for analyses based on sample data. We also discuss the interpretation of state‐based modeling results for both neutral and directed systems, and address the practical question of how state‐based approaches can be used in conjunction with established variable‐based methods.

The paper seeks to respond to calls by Jones for more studies exploring the possibility of operationalising accounting for biodiversity.

Archival data are used to produce a natural inventory report for the Sundarbans, the world's largest mangrove forest declared as a World Heritage site by UNESCO in 2007.

The study extends prior research on biodiversity accounting by exploring the applicability of Jones' natural inventory model in the context of Bangladesh. The results indicate that application of Jones' natural inventory model is feasible in the context of developing countries such as Bangladesh. It is also recognised that the socio‐economic and political environment prevailing in developing economies may lead to the emergence of important stakeholder groups including local civil society bodies, international donor agencies and foreign governments. Biodiversity accounting may provide a legitimate basis for the government in allaying concerns regarding environmental stewardship and assist in negotiations with powerful stakeholder groups on important issues such as financial assistance after natural disasters and claims to the global climate change fund.

This is one of the early attempts to operationalise biodiversity accounting in the context of a developing economy.

In periods of economic distress, expectations for businesses change and there is a heightened need for reporting quality. This study investigates the impact of crises on earnings management in the real estate sector.

The data consisted of financial statements from 2005 to 2021 from real estate firms listed on 10 European stock exchanges. Estimated discretionary accruals from four standard accruals models were used as a proxy for earnings management, using cross-sectional industry and firm fixed effects models. The authors examined earnings management during three crises: the financial crisis (2008–2009), the debt crisis (2011–2012) and the COVID-19 pandemic (2020–2021).

The results showed less earnings management during the COVID-19 crisis and more earnings management during the financial crisis, though with slightly weaker evidence. The authors did not find significant evidence of earnings management related to the debt crisis. These results suggest that stakeholders in the real estate sector should be extra vigilant in crisis periods.

This study is the first to investigate earnings management in European real estate firms, focusing on the impact of crises.