THE DANGEROUS MORALITY OF MANAGING EARNINGS*

Actions for Concerned Managers We believe most corporations would benefit if they established clearer accounting and operating standards for all employees to follow. The standard-setting process should involve managers in discussions of the practices related to short-term earnings measurements. Until these standards are in place, different managers will use widely varying criteria in assessing the acceptability of various earnings-management practices. These variations will have an adverse effect on the quality of the firm’s financial information. Companies can use a questionnaire similar to the one in our study to encourage discussion and to communicate corporate standards and the reason for them. Standards also enable internal and external auditors and management to judge whether the desired quality of earnings is being maintained. In most companies, auditors can depend on good standards to identify and judge the acceptability of the operating manipulations. Ultimately, the line management chain-of-command, not auditors or financial staff, bears the primary responsibility for controlling operating manipulations. Often managers must rely on their prior experience and good judgment to distinguish between a decision that will have positive long-term benefits and one that has a positive short-term effect but a deleterious long-term effect. Finally, it is important to manage the corporate culture. A culture that promotes openness and cooperative problem solving among managers is likely to result in less short-term earnings management than one that is more competitive and where annual, and even quarterly, performance shortfalls are punished. A corporate culture that is more concerned with managing for excellence rather than for reporting short-term profits will be less likely to support the widespread use of immoral earnings management practices.

Required

a. Time, laws, regulation, and professional standards have restricted accounting practices to those that are moral, ethical, fair, and precise. Comment.

b. Most managers surveyed had a conservative, strict interpretation of what is moral or ethical in financial reporting. Comment.

c. The managers surveyed exhibited a surprising agreement as to what constitutes an ethical or unethical practice. Comment.

d. List the five generalizations from the findings in this study relating to managing earnings.

e. Comment on management’s ability to manage earnings in the long run by influencing financial accounting.

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Students are required to complete the following comprehensive computerised business simulation accounting exercise Handy Motor Parts Pty Ltd using MYOB Accountright plus 2018.3 /2018.4 version. The assessment will introduce you how to use an accounting software and will allow you to set up a company from scratch and to consolidate your knowledge of transaction processing.

Once you have completed the exercise you are required to print the following reports in a PDF format and submit them to your lecturer. Students who fail to print reports in the above-mentioned format will be penalised.

Attachments:

AIS.doc

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You are a midlevel manager at a major metropolitan hospital and are responsible for capturing and reporting statistics regarding the cost and quality of patient care. You believe in a strict interpretation when defining various reportable incidents; as a result, your hospital’s rating on a number of quality issues has declined in the six months you have held the position. Your predecessor was more lenient and was inclined to let minor incidents go unreported or to classify some serious incidents as less serious. The quarterly quality meeting is next week, and you know that your reporting will be challenged by the chief of staff and other members of the quality review board. How should you prepare for this meeting? Should you defend your strict reporting procedures or revert to the former reporting process for the “sake of consistency in the numbers,” as several people have urged?

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a club has 10 member and 6 pledges. five of them are arranged in sequence for a club meeting. the 5 are selected and seated at random. find the probability that

a) members are in seats 1 and 2 and pledges in seats 3 through 5

b) members and pledges alternate seats with members in seats 1,3,5 and pledges in seats 2 and 4

Please explain in details. Thank you.

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