In Singapore, the reporting of financial statements is in compliance with the financial reporting system with the objective of providing financial information which is useful to a wide range of users in making economic decisions.
Earnings management however, is one behavior which might undermine the credibility of financial statements. Ex-SEC Chairman, Levitt once quoted: "The quality of earnings is eroding because managing give way to manipulation and integrity may be losing out to illusion."
This paper studies the financial statements of Unifiber and economic conditions surrounding the organization which might motivate earnings management behavior. We will then discuss on corporate governance mechanisms instituted in UniFiber to enhance the quality of the reported information.
Understanding of Earnings Management
Earnings management can be defined based on a spectrum of different motivations excluding illegal fraudulence as seen in the following table.