How Ethical is Earnings Management? Evidence from an Emerging Economy

ABSTRACT

Building upon Role Theory, Agency Theory, and Experiential Learning Theory, this study explores the ethical viewpoints of earnings management (EM) across various professional roles within the accounting and finance profession in Turkey. Employing survey methodology and in-depth interviews, data were collected from educators, students, accountants, and auditors to provide insights into the ethics of EM, enhancing understanding and informing more ethically grounded practices within accounting and finance. This study identifies not only traditional opportunistic and informative forms of EM but also unveils strategic and deceptive dimensions, reflecting diverse ethical interpretations across professional roles. It posits that perceptions of EM's ethicality differ among stakeholder groups, influenced by professional roles and experience. Findings reveal that students have more lenient views due to limited experience, whereas auditors and accountants exhibit stricter stances, shaped by practical exposure. Educators influence these perceptions, highlighting the need for enhanced ethical guidance in education and practice.

Keywords:

• earnings management
• agency theory
• role theory
• experiential learning theory
• in-depth interview
• ethics

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 Throughout this paper, ‘EM’ refers to the range of accounting decisions that impact the financial statement and are within the scope of IFRS guidelines adopted by Turkey. This includes the timing of transactions and the selection among acceptable accounting policies. The term ‘manipulation’ is used specifically to denote adjustments or techniques applied to individual accounts with the intent of significantly altering earnings figures, which falls outside the ethical and legal boundries of financial reporting.

2 The study was approved by the Human Research Ethics Committee of the (x) University (Date: 21.12.2022, No:2022/19, Confirmation Code: 2022/19/04)

3 https://bmmgd.org.tr

4 https://dusbd.kgk.gov.tr