Earnings Management: A critical Literature Review

Abstract

Purpose: The purpose of this study was to takes a critical literature review of earnings management with the aim of establishing research gaps and areas for further research.

 Methodology: The study employed meta-analysis technique by relying on findings from prior studies to draw conclusion. The study reviewed empirical evidence from both international and local context covering the period 2014 to 2020.

Findings: The study established both accrual based and real earnings approach techniques were used in detection of earnings management. With majority of studies suggesting Jones modified model as the most accurate, in detecting earnings management. However, the studies  were inconlusive on the motivation for earnings management. The results on the relationship between earnings management, corporate governance and modified opinion were mixed.

Implications: The findings that links earnings management, modified audit opinions and corporate governance will  be of interest to policy makers and those charged with corporate governance on how it can be constrained.

Value of Study: The  study contributes to litelature by evaluating theoretical and empirical evidence.  The study also has helped  to identify research gaps, how to operationalize and test variables