Thursday, November 21, 2019

Critical Thinking 2 Essay Example | Topics and Well Written Essays - 500 words

Critical Thinking 2 - Essay Example Managing earnings is a commonly used strategy that bears many controversies on moral grounds. As matter of fact, managers differ on whether the act is ethical or unethical and only used as the last resort. Managing earnings barely refers to transferring earnings of one period and reporting them in a different period. For that reason, the actions results to nominal rather than real positive benefits. Remarkably, managers only use it lure a positive report as per the specified period. Therefore, managing of earnings is totally unethical as it manipulates the information that the reports provides. Managers understand this fact and thus consider manipulating earnings as only a short-term strategy with majority expecting an advanced long-term consequence. Neither the law nor GAAPs find managing earnings as an inappropriate measure and thus the decision on whether to use it or not is solemnly made by the managers. Literally it happens that every manager has used any of the earning managing options at a time. Though manipulation of operation expenses seems to a best measure, especially when used to reduce earnings, as argued by managers, all measures have one limitation in common. They favour the current report by hiding or misinterpreting crucial information necessary for mutual correlation of all stakeholders (Ketz,  2006). Worse though, these stakeholders are the victims of any misfortunes accruing from the manipulation process. I that perspective, manipulation become unethical as it serves the needs of the manager at the expense of other stakeholders. Though a perfect short term solution adjustable in the long-run, that maybe in line with organisations, the fact that managers are short lived in the organisation as compared to sta keholders, creates some sense of the dilemma addressed in the agency theory.

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