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Is Earnings Management Ethical?: Between the "Beauty" and the "Beast"
Last modified: 2017-07-06
Abstract
The purpose of the study is to explore the perceptions of accounting students about whether earnings management is ethical or not as well as to understand why differences in answers exist. This topic is believed to be compelling up to today, since earnings management practice is still controversial from the ethical point of view. This research is inductive in nature by using qualitative descriptive research design. The informants were undergraduate accounting students in several universities in Indonesia who were in the final years of their studies. The data was gathered by in-depth semi-structured interviews and analysis was conducted using thematic analysis. The results reveal that earnings management both has the “beauty” as well as the “beast” sides. Earnings management was considered as the “beauty” by those informants who did not have specific business ethics subject on their curriculum. Contradictorily, the students who got the subject perceived that earnings management was the “beast” or unethical. Moreover, most of the informants also considered that earnings management was also a mixed between the “beauty” and the “beast” because it is only a matter of accounting policy choice. However, when the purpose of doing earnings management is to manipulate the financial statement, then it becomes unethical. Finally, earnings management is also linked with the managers as the main actors behind it. They are the “beauty” if they can manage the earnings ethically based on the accounting standards for the sake of the corporation as well as the shareholders, yet the managers become the “beast” when they act in such a way to mislead the financial statement’s users for their individual interests.
Keywords
ethics; earnings management; accounting students
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