Abstract:
An intentional manipulation of corporate financial data in order to achieve a specific
objective, which is driven by market, contractual or regulative motive is introduced
as Earnings Management. Therefore, this study attempts to pursue the professionals’
attitudes toward the ethical acceptability of earnings management practices and
whether professional’s attitudes differ with their demographic characteristics.
The professionals who work in the accounting and auditing sector were guided
with thirteen difference earnings management scenarios which were adapted from
Clikeman et al.’s (2000) study. Their responses for these 13 different scenarios were
recorded with their demographic characteristics and SPSS 16 statistical package
was used for the analysis.100 accounting/ auditing professional’s selected based
on convenient sampling were given a scenario based Lickert scale questionnaire as
aforementioned. The response rate was 90% where 53.3% were males and 46.7%
females. 55.6% represented non- audit sector. 40% of participants were belonged
to the middle layer of management hierarchy and 72.2% were in the age group of
21- 30 years. The research findings contribute to the literature that the perception
of ethical acceptability of earnings management is not affected by demographic
variables. The earnings management framework provides a sensible explanation of
ethical acceptability of earnings management practices in Sri Lanka. The loopholes
in the market operations, contractual obligations and regulations induce business
entities to execute unethical earnings management practices. Therefore it is in
need of an ethical framework.
