ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

The Choice of Earnings Management using Accounting Accruals, Prior Period Error Corrections or Accounting Changes

  • Kym Moon Hyun Hankuk University of Foreign Studies

Asian Tax Journal Vol. 12 No. 4 (2011), pp. 103-120

Abstract

The purpose of this study is to test how accounting accruals, prior period error corrections or accounting changes were used as a means of earnings management. The expectation is a negative relation between discretionary current accruals and prior period error corrections or accounting changes. Test period is from 2004 to 2007. Samples were 111 firms and 735 other firms were selected for a comparison from public, manufacturing firms. The empirical results showed that there was a negative relation between discretionary current accruals and effect of prior period error corrections or accounting changes . Also, there was a negative relation between discretionary current accruals in time＝0 and those of time＝±1；time＝0 is when firms reported prior period error corrections or accounting changes. The empirical results imply that the firms which tend to manage earnings are likely to use accounting accruals, prior period error corrections or accounting changes in order. If there are not enough accounting accruals, the next means of earnings management will be prior period error corrections or accounting changes.

Keywords

  • discretionary current accruals
  • prior period error corrections
  • accounting changes
  • earnings management

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Asian Tax Journal

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