Study On The Influence Of Accounting Professional Judgment On Earnings Management

China’s Ministry of Finance issued a new "Enterprise Accounting Standards"in February2006and requires the listed companies execute under the new rulesfrom January1,2007. New guidelines is the principle-oriented, giving businessesgreater freedom and choice, and allowing corporate managers to deal withaccounts according to their own judgments. It increases the relevance ofaccounting information, but also makes companies depend more on accountingprofessional judgments facing accounting treatment, and gives managers greaterearnings management space, which may cause profits manipulation——leading toreduction of reliability of accounting information. Therefore, it has importanttheoretical and practical significance for governing listed companies’ earningsmanagement behavior to study the relation between earnings management andaccounting professional judgment.Earnings management is a neutral dealing. Moderate and appropriateearnings management is good for the long-term development of enterprises, andalso could promote the development of China’s capital market. Therefore,referring to domestic and international studies on accounting professionaljudgment and earnings management, this paper points out the internal and externalfactors affecting the overall efficiency of accounting professional judgment andempirically researches the impact of these factors on earnings management, basedon the process of accounting earnings information’s generation. In the empiricalanalysis, based on the A-share companies listed in Shenzhen and ShanghaiExchanges in2008and2009, this paper tests the impact of subject’s ability andobject of accounting professional judgment, internal governance factors, CPA andother regulatory agencies assess on earnings management. There are threeconclusions as follows:1st, the subject’s ability has a significant positivecorrelation with earnings management, and managerial subjection of earningsmade by financial executives is acceptable in pursuit of long-term development ina reasonable context;2nd, the internal governance structure’s degree has asignificant positive correlation with earnings management, and the more perfectthe mechanism of internal governance, the greater the likelihood of earnings management standing on the long-term development perspective;3rd, for China’scapital market development is not perfect, external oversight measures as CPA andother regulatory agencies assess have unobvious impact on earnings management.