ESSENTIAL TOOLS AND STRATEGIES FOR DETECTING MANIPULATION.

As recent corporate scandals prove, corrupt companies can maintain a façade of financial success through manipulation and fraud almost to the day they file for bankruptcy. Fortunately, tools exists to detect aggressive earnings management.

This timely book reviews the current environment, explains the tools that can be used to detect a manipulative financial environment, and introduces techniques for recasting financial information to get a truer economic picture. Brief cases reflecting a variety of companies provide a feel for evaluating public data and how earning management potential can be analyzed. In addition, an appendix features a complete earnings management detection checklist that can be used to conduct a thorough analysis of any corporation.

Detecting Earning Managementwill help readers:

• Identify the incentive of management to manipulate earning to promote their own short-term interests.
• Evaluate the effectiveness of corporate governance to limit short-term manipulation and promote long-term success.
• Consider whether recent regulations, such as Sarbanes-Oxley, will limit future abuse.
• Review the major fraud techniques used in the recent and not-so-recent scandals.
• Identify the potential areas of manipulation and other sources of distortion and develop appropriate detection strategies.
• Understand the challenging areas that can distort financial reality such as acquisitions, derivatives, and special purpose entities.

As recent corporate scandals prove, corrupt companies can maintain a façade of financial success through manipulation and fraud almost to the day they file for bankruptcy. Fortunately, tools exists to detect aggressive earnings management. This timely book reviews the current environment, explains the tools that can be used to detect a manipulative financial environment, and introduces techniques for recasting financial information to get a truer economic picture. Brief cases reflecting a variety of companies provide a feel for evaluating public data and how earning management potential can be analyzed. In addition, an appendix features a complete earnings management detection checklist that can be used to conduct a thorough analysis of any corporation.

Earnings management is one of the most significant areas of accounting given today's scandal-plagued business environment. This focused treatment describes the current environment and provides the details on specific earnings management potential. It demonstrates how aggressive earnings management can be detected using publicly available information.

Gary Girouxis Shelton Professor of Accounting at Texas A&M University. He received his Ph.D. from Texas Tech University and has been at Texas A&M for about twenty-five years. He teaches financial analysis and other financial and governmental courses in the undergraduate program. He also teaches research methods in the Ph.D. program.

Dr. Giroux has published over fifty articles, including publications in Accounting Review, Journal of Accounting Research, Accounting, Organizations and Society, Journal of Accounting and Public Policy, and numerous other journals. He is the author of three earlier books, including Dollars & Scholars, Scribes & Bribes: The Story of Accountingand Financial Analysis: A User Approach. His primary research areas are governmental and financial accounting. He also is interested in accounting and business history.

He has a number of outside interests, including collecting revenue documents and stamps, reading, golf, and scuba diving. He and his wife Naomi travel regularly, in part based on international research projects and presentations.

Preface.

About the Author.

Acknowledgments. 

1. What is Earnings Management?

2. Companies in Trouble—A Historical Perspective.

3. What's in a Financial Report and What to Do with It?

4. The Balance Sheet.

5. The Income Statement, Part I—Level 1 Analysis.

6. The Income Statement, Part II—Expenses, Nonoperating Items.

7. Cash Flows and Alternative Definitions of the Bottom Line.

8. Evaluating Trends, Norms and Quarterly Data.

9. Business Combinations ad Related Issues.

10. Corporate Governance, Compensation, and Other Employee Issues.

11. Risk Management, Derivatives, and Special-Purpose Entities.

Appendix.

Glossary.

References.

Index.