Earnings Management During Import Relief Investigations

Topics: Import, Decision making, Decision theory Pages: 4 (1393 words) Published: February 24, 2014
Earnings Management During Import Relief Investigations
“Earnings Management During Import Relief Investigations” was written by Jennifer J. Jones. It illustrates her study and examination of the effects of managing reported earnings to alleviate the costs of tariffs and quota increases on import businesses. The ITC or (United States International Trade Commission) conducts relief investigations on companies that import goods so they can make a determination on the import relief rate. The ITC sets the import relief after reviewing a plethora of factors. Some factors include the profitability of the industry and the trends in profitability. Import relief is described as a set of federally imposed regulations which are designated to suspend or restrict the importation of goods into the country in order to protect American manufacturers. The measures often include subsidies, restriction, and assistance to domestic companies. The author describes the reasoning behind the import relief, as well as the effects of the import relief on the affected parties. Because consumers have diverse interests the effects of the import relief has not been studied in great detail. Often contractors who share a relation to the import business carefully monitor and adjust the accounting numbers to influence the policy makers into not raising the import relief rate. The author says that import relief is basically a wealth transfer from the consumer to the domestic producers because the importers will simply raise prices as the import relief gets higher, and domestic producers will make money because their prices can be highly competitive with the importers. In this exchange the ultimate losers are the consumers who will either pay a higher price for imported goods or buy domestic products which generally cost more. Because consumers do not monitor the earnings of import companies the import companies are able to manipulate earnings nearly unhindered. This manipulation of accounting...
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