Financial Reporting–the Old Age Tussle between Legality and Quality in Context of Earnings Management

Abstract

Financial reporting is the only means of communicating the financial information of the business to all the stakeholders as a part of legal compliance. But, the most inevitable part is ‘the quality of financial reporting practices of the companies.’ Quality reporting undoubtedly is the key requirement for determining the future of global financial reporting as it shows the quality of skills and the degree of success achieved in the performance of different operations and management of an enterprise. This is where, ‘Earnings Management’ by corporate comes into existence. The present discussion becomes altogether more relevant when almost every country has witnessed some or the other corporate fraud. The present paper is an attempt to highlight the importance of quality financial reporting in shaping up the true economics of business and maximizing the shareholders‟ return, in the context of Earnings Managements. It analyzes this fight of legality vs. quality of financial reporting and stresses upon the need for improving the quality of international financial reporting.