The Role of Accounting Conservatism in Financial Reporting in Reducing the Practice of Earnings Management in Jordanian Extractive Companies
This study examines the relationship between the accounting conservatism and earnings management, and the role of the accounting conservatism in reducing the practice of earnings management. Accounting conservatism was measured using the ratio of the total accrueds to the gross profit, and earnings management was measured by (Modified Jones model, 1996).
Sample of the study included all extractive companies listed on the Amman Stock Exchange, which have data in the Amman Stock Exchange during the study period (2010-2014).
The Results of the study showed that the level of accounting conservatism in the extractive companies listed on the ASE was low, in percentage 33%, and the results showed that the percentage of the degree of earnings management was 37%, the study concluded that threr were a negative relationship between the level of conservatism accounting in financial reporting in the extractive companies listed on the Amman Stock Exchange and the degree of earnings management practice.
The researcher recommended increasing interest in the concept of accounting conservatism, and define investors the importance of this concept and the negative effects they will face in the case of non-application this concept in the financial reporting.
- Alkhabash, Ahmad, 2007, Earning Management Practices From the Perspective of External and Internal Auditors: Evidence from Jordan, Theses, University of Jordan.
- Ball, R., and Shivakumar, L., 2005, Earning Quality in UK Private Firms: Comparative loss recognition timeliness, Journal of Accounting and Economics.Available on line: http://faculity.london.edu.
- Ball , Robin and Sadaka , 2005, " Is Accounting Conservatism Due to Debt Equity Markets ? An International Test of Contracting and Value Relevance " , Theories of Accounting , Available From www.ssrn.com .
- Basu, S. , 1997, The conservatism principle and asymmetric timeliness of earnings, Journal of Accounting and Economics, Vol.24 (3) P. 3-37.
- Belkaoui, A.R., 2004, Accounting Theory, Fifth Edition, Thomson Learning, London.
- Dechow P., Sloan R., & Sweeney A. (1995). Detecting Earnings
Management. The Accounting Review, 70 (2): 193-225.
- Jain and Rezaee, 2004, The Sarbanes-Oxley Act of 2002 and Accounting conservatism , Available at www.ssrn.com
- Kangarluei and Hesar, 2012, Dose Conservatism in Financial Reporting affect Earnings management, An evidence of Iran, African Journal of Business and management, Vol (6) 21.
- Lara, Juan, 2012, Accounting conservatism and the limits to Earnings management, dissertation, University of Navarra.
- Leuz, C., Nanda, D., and Wyscoki, P., 2003, earning management and investor protection: An International comparison، Journal of Finance Economy، 69: 505 – 538.
- Mckee, Thomas, 2005, Earning Management, First Edition, East Tennessee State University, Thomson Learning Academic Research Center, USA.
- Mohanram, P.S., 2003, How To Manage Earning Management, Journal of Business, 76/6.
- Nahandi, et al, 2012, Earnings management and Accounting conservatism, The case of Iran, African Journal of Business and management, Vol (6) 19.
- Petrusk, 2008, Accounting conservatism, Cost of capital and fraudulent financial report, dissertation, Kent University.
- Prawitt, D. F., Smith, J. L., and Wood, D. A., 2009, Internal Audit Quality and Earning Management, The accounting review, Vol. 84.Available on line: http://ssrn.com/abstract=916081
- Watts, 2003, Conservatism in Accounting, Explanation and implication, Accounting Horizons, 17(1), 207 - 221.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.