Opportunistic use of Accrual Earnings in Financial Reporting: A Study of BSE Listed Firmsin India
Journal Title: International Journal of Computational Engineering and Management IJCEM - Year 2015, Vol 18, Issue 4
Abstract
The study attempted to explore the role of discretionary accrual to conceal the actual earnings as a part of misapplication of flexible area in financial estimate in Indian BSE listed companies. As accruals have always provided a common opportunity to deceive financial statements users where the effect causes the financial statements not to be presented, in all material respects, and so along with the H&C (2002) model for total accruals, the most admired DeAngelo (1986)model has been applied for calculating discretionary accruals as part of the treatment for potential earnings management practices for the study. With the sample of BSE listed (industry wise) top 50 companies in India from 2010-2014, an attempt is made to investigate material misstatements issue with respect to industry classification on the basis of service and non-service sectors. It is found that the service sector industries are involve in income decreasing earnings management practices while non-service sector industries are in reverse practice. Apart from negative correlation between assets size of the firm and discretionary accruals. It is found that the entities of all sizes are susceptible with aberrant pattern and despite the fact that the large firms are engage in income decreasing earnings management practices, on the contrary the small firms are more likely involve in income increasing practices in financial reporting of service or non-service sector under which it is operating.
Authors and Affiliations
Chinmoy Roy, Pranesh Debnath
Keywords
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