The Five Generalizations

Good Essays
Adrian Medina
Module 2
FIN400 – Analyzing Financial Statements
CSU – Global
Dr. Osman Masahudu

The five generalizations that I believe are from the findings in the case study “The Dangerous Morality of Managing Earnings” go back to the code of ethics that the SEC has set in place. The first is “Honest and ethical conduct,” (Gibson, C.H. 2011) which a lot of the managers showed that they were not honest by doing what they felt necessary to show a positive bottom line. The second generalization is the “full, fair, accurate, timely, and understandable disclosure in reports and documents that a company files,” (Gibson, C.H. 2011). By doing whatever it takes to try and improve the short term the managers are not truly being truthful in their reporting. It is a form doctoring the bottom line because they will use tricks or gimmicks to get the job done. The third generalization that I see is the compliance with governmental laws and regulations. While the things that were done were not against the law they start to “toe the line”. When this type of behavior is being made known it shows that the managers are willing to cross the line to do whatever it takes to get the job done. The fourth is the prompt internal reporting of code violations. If the company cannot report or monitor itself internally then the company will feel that it is capable of doing whatever it feels like. Just like a child that does not have any discipline they will push the issues and try to get away with more and more every single time. The last generalization that I see is the accountability and adherence to the code of ethics. If the managers are not held accountable for their actions then they will be like that spoiled child and try to get away with anything and everything. Accountability is the key to ensuring that the managers have some integrity. Not only do the managers need to be accountable for their actions they need to have the integrity to adhere to the any code of

References: Geiger, M.A., Quirvan, C. & Hazera, A. (2007). An International Comparison of Student Perceptions of Earnings Management Evidence of Effects of National Origin Between Mexico and the United States. Retrieved from Gibson, C. H. (2011). Financial reporting and analysis: Using financial accounting Information (12th ed.). Mason, OH: South-Western Cengage Learning.

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