Analysis And Regulation Of Corporate Management Earnings Of Hui Ting Group Company

Earnings management behavior of enterprises has always been the research focus.In China, since February2006when the Ministry of Finance issued a new accountingstandard, more and more professors in this field have conducted an extensive andin-depth study of earnings management. With the development of economy andsociety, earnings management methods are becoming increasingly complex and hardto be found by the government and auditors. Reasonable earnings managementbehavior could show a true and fair view of the company’s financial performance tothe user of financial data. However, in many cases, companies often tend to useexcessive earnings management methods. Some companies even use irrational ways inorder to manipulate profits. These behaviors may not only do harm to the effectiveoperation of the market, but also hurt the interests of investors, especially smallinvestors.The paper first introduces other professors’ research findings and some basictheories about earnings management behavior. Then, based on the case of A GroupCompany, using the theories mentioned before to analyze if A Group Company hasused excessive earnings management methods in order to manipulate its profits. Theresult shows that under the IPO motivation, A Group Company does exist excessiveearnings management behavior, the means adopted by A Group Company are mainlyaccrued management methods, such as changing the estimation of bad debts andmaking inventory impairment provision. Meanwhile, A Group Company also uses thereal earnings management methods such as cutting R&D spending. Finally, the papergives some advices on the regulation of companies’ excessive earnings managementbehavior, especially companies in the IPO process.This paper argues that appropriate earnings management behavior andaccounting principles do not actually conflict, on the contrary, based on the decisionusefulness theory, current accounting standards and earnings management system alsoprovides considerable support for appropriate earnings management behavior. Whentaking consideration of efficient markets theory, earnings management behavior willlead to more accurate information of the company. It improves the effectiveness of themarket, and also can reduce the country’s macroeconomic fluctuation. Thus, it is notimpossible and unnecessary to completely eliminate corporate earnings management behavior. Our attitude to earnings management behavior should be promoting andprotecting the appropriate earnings management behavior, putting strict supervisionover excessive earnings management behavior, and eliminating frauds in order tomaintain the integrity of accounting and financial order.