Accounts Manipulation: A Literature Review and Proposed Conceptual Framework

G. Breton, H. STOLOWY

Review of Accounting and Finance

2004, vol. 3, n°1, pp.5-66

Départements : Comptabilité et Contrôle de Gestion, GREGHEC (CNRS)

Accounts manipulation has been the subject of research, discussion and even controversy in several countries including the USA, Canada, the U.K., Australia, Finland and France. The objective of this paper is to provide a comprehensive review of the literature and propose a conceptual framework for accounts manipulation. This framework is based on the possibility of wealth transfer between the different stake- holders, and in practice, the target of the manipulation appears generally to be the earnings per share and the debt/equity ratio. The paper also describes the different actors involved and their potential gains and losses. We review the literature on the various techniques of accounts manipulation: earnings management, income smoothing, big bath accounting, creative accounting, and window-dressing. The various definitions of ail these, the main motivations behind their application and the research methodologies used are ail examined. This study reveals that ail the above techniques have common elements, but there are also important differences between them.