Up to 20% of companies manipulate their earnings to misrepresent their economic performance, according to a study by professors at Emory and Duke. Compliance Week reports that a majority of the 170 CFOs surveyed by the researchers believe companies manage earnings to influence their stock price or to avoid consequences for senior executives under pressure to hit earnings targets. Two-fifths of CFOs said they believe more than 15% of companies manage their earnings, and more than 99% of CFOs said that at least some companies do.

The Securities and Exchange Commission cracked down on managed earnings in the 1990s. According to the study, the most common indications of the practice are persistent deviations between earnings and cash flow, numbers that vary widely from what similar companies are reporting and large changes in accruals. To improve the quality of reported earnings, the CFOs surveyed suggested that the Financial Accounting Standards Board impose fewer rules and merge U.S. GAAP with international accounting standards.

For the full story.

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
  • Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.