Healy and Wahlen State That One Type of Earnings Management

Essay

Healy and Wahlen state that one type of earnings management occurs when managers use judgement in financial reporting to alter financial reports in order to mislead some stakeholder about the economic performance of the company.Earnings management is a consequence of a judgement by management which results in lower economic information content of the financial reports.
Discuss four reasons that discourage managers from practicing earnings management.