ACCOUNTING POLICIES, EARNINGS MANAGEMENT AND THE CEO/CFOs

Research on accounting choice addresses the fundamental question of whether accounting matters. An accounting choice is any decision whose primary purpose is to influence, either in form or substance, the output of the accounting system in a particular way, including not only financial statements published in accordance with accounting principles, but also tax returns and regulatory filings. There is still no consensus on what purposes accounting choices serve. For example, managers whose incentives are consistent with those of the firms' owners may exercise accounting choices to convey private information to investors; other managers may use discretion opportunistically, possibly inflating earnings to increase their compensation. In our paper, we present the relationship between companies' chief financial officers and the incomes reported.