Started in 1990s, Accounting practices introduced many terms like: Creative Accounting, Aggressive
Accounting, Earnings Management and Financial Shenanigans.
Creative Accounting has a positive meaning in terms of language, that is why so many people accepted
and justified this Accounting practice as a good idea. Many Academicians argued that creative
accounting is permissible as long as it is not contrary to the rule.
In this article we will evaluate Earnings Management from the stand point of Business Ethics.
According to ethical principles, one should consider not only legal aspect, but also other domain like
social, economic and ethical domain, in making decision. We have to realize that something legal is
not necessarily ethical.
Earnings Management practices have three main motives that are: market incentives, contracting
incentives and regulat01y incentives. All of that motives will give maximum benefit to vety limited
number of people at the expense of large number of people. This practice doesn't meet utilitarian
theory. In Earnings Management practices Accountant "manipulate" his accounting data, so it can
be concluded that it is in contrary with Deontological theory and The Theory of Virtue. There is no
right way to do wrong things.