Abstract
Research background: Earnings management means the usage of gaps in the legislative frameworks of individual countries and their accounting systems in the global world. Businesses thus adjust profits and revenues to the form that is desirable and desired for them. However, there is a very thin line between fraud and earnings management. By adjusting their financial statements, companies seek to impress potential investors and influence their own market position. Purpose of the article: The main goal of the article is to describe the possibilities and methods of detection of earnings management in companies in aspects of globalization. The article contains a brief overview of theoretical knowledge and definitions about earnings management. The contribution of the article lies in the application of the selected method to a specific company and based on the outputs of the model to determine whether the company is using earnings management. Methods: The scientific method of analysis was used in the article, on the basis of which the obtained information was necessary for further calculations. A calculation based on the Beneish model was used to determine the use of earnings management. Findings & Value added: The output of the article is the application of the Beneish model in the detection of earnings management in a selected company. In the calculation process, pre-established theoretical knowledge on the issue and the numerical characteristics of the selected company were used. Finally, the application of earnings management in the company can be ruled out.
Highlights
Earnings management belongs to the range of financial fraud or financial crime, which result in the recognition of profits in an incomplete or untrue manner
The Beneish model was applied in a selected company, which deals with the processing, and production of food products
Despite a large number of articles is not a uniform view of the best testing methods, and whether it is possible at all demonstrate earnings management by external testing
Summary
Earnings management belongs to the range of financial fraud or financial crime, which result in the recognition of profits in an incomplete or untrue manner. Earnings management should be carried out with an awareness of the moral responsibility of each company to its customers, stakeholders [1]. Earings management is carried out using practices such as Income Smoothing, and Big Bath Charges. In the second area in terms of Earnings Quality (profit quality management), techniques such as aggressive accounting, Window Dressing (a strategy to improve financial reports), and last but not least, the so-called off-balance-sheet financing [2]. The second possible definition describes earnings management as a deliberate intervention in the external financial reporting process to obtain a private contribution (as opposed to facilitating the neutrality of the process) [4] The first of the definitions related to earnings management is the definition by Degeorg, Patel, and Zeckhauserem (1999): "Earnings management is a strategic use of managerial judgment in influencing profit values reported by external users shift between periods "[3].
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
