reporting goals have been met in the normal course of operations.” Certain methods for
manipulating real activities, such as sales promotions using discounted price and/or a
discretionary expenditures reduction, are optimal given certain economic circumstances.
However, it is hard for stakeholders to detect by regulators and auditors which are in favor of
management under the various economics contexts (Roychowdhury, 2006; Zang, 2012,
Kothari et al., 2012).
In summary, any firms that have earnings management would be observed within the
jump of accepted accounting procedure manipulation. Thus, earnings management is more
informative and trustworthy if they are followed by a good governing system.