Business Financial Crime Coursework Example | Topics and Well Written Essays - 2500 words

Business Financial Crime - Coursework Example The paper analyzes the frauds associated in the earning management and cites some cases of frauds in the earning management. A section of the paper also deals with the regulatory framework of earning management in countries like USA and UK. The concept of earning management can be defined under three board heads of white, black and Gray. White signifies the beneficial earnings which are used to enhance the transparency of the financial reports whereas black signifies the misrepresentation of the report and involves fraudulent activities. The gray denotes the manipulation of financial reports which occurs within the boundaries of the compliance, which are done to enhance the efficiency or to provide opportunistic results. Under the gray concept, earning management involves the selection of accounting principles which helps to maximize the overall utility of the management of the organization. Earning management is initiated by the mangers when they use their judgment in the reporting of the financial statement and alters certain information within the reports for misleading the stake holders or to influence the outcome of certain contracts which depends on the stability of the organization in terms of accounting figures . However all earning management does not involves the misrepresentation of the facts and figures. Certain organizations do not resolve to distortion of figures of the accounting report and allows the investors to distinguish between the various components and they only undertake operations which enhance the value of the information associated with the earnings of the organization. Earning management often proves to be beneficial in determining the long term value of the organization and at the same it can be pernicious while concealing the short term value. The concept of earning management is declared as fraud and it violates the rule specified by GAAP, when the organization records sales in the accounting reports