Is it unethical for a company to intentionally understate its earnings? Why or why not?
Yes, it is clearly unethical to intentionally understate earnings since the management makes representations that the financial statements are complete and accurate.
It is obvious that intentionally understating earnings is done to allow the company to later overstate earnings by using falsified reserves to cover the inadequate current period earnings.
These manipulations and misrepresentations do not allow fair comparisons of the results of operations between years.