The Continuum from Legitimacy to Fraud Research Paper - 9

The Continuum from Legitimacy to Fraud - Research Paper ExampleThis essay demonstrates that the suitability of an account statement policy under the requirements of Generally Accepted Accounting Principles (GAAP) draws a line on the continuum that distinguishes trustworthy winnings management from fictitious story transactions. The process of determination of whether or when earnings management dealings do cross the line is essentially difficult to ascertain legitimacy to fraud, especially in certain situations on financial transactions. Legitimate earnings management in an entity translates to quality in earnings but with no reference to whether there has been a fair presentation of the financial statements that are convenient to the generally sure accounting principles. Auditors roles with regard to quality of the entitys earnings are important though their responsibilities are spelled bring out in detection and reporting of fraud. Auditors need to address their judgments ab out quality and the acceptability of the entitys principles of accounting and all the financial estimates that underlie the statements. Auditors should always inform the perpetration on the audit on the unacceptability approach at the end of the accounting period so as to improve the overall long suit of the corporate body on audit committees. The communication between the auditors and the committee on the audit is seen as an avenue for enhancing clear understanding of the quality of earnings and all the issues related to it hence improving the level of financial reporting. ... ?42 4.0 Question 4 Overview Ethical Considerations..45 4.1 Recommendations46 4.2 Corporate mechanisms to avoid fraudulent salary Management.50 4.3 Board oversight.51 4.4 External Audit and internal Audit reporting to Audit committee of Board..52 4.5 Whistleblower procedures.52 4.6 Code of conduct and ethics of Financial Officers.53 4.7 Philosophical Stance.54 4.8 References..55 Question 1 Overview Theoreti cal and Conceptual Knowledge Introduction (Overview) Earnings management entails an extensive range of illegitimate and legitimate actions undertaken by companies and business organizations managements, affecting the entire legal entities overall earnings. In understanding this phenomenon of earnings management, its important to acquit a wide overview of the legitimate managerial activities carried out in an entity and the fraudulent reporting that is spearheaded by accountants and the entire management of an organization. The management of earnings leans on the credibility of financial information which is adversely affected by legal or illegal undertakings. All managerial activities within an organization have various implications and potential effects on earnings management.