Research Article
Nadhim Shaalan Jabbar
Abstract
Due to the importance that net earning represents to the institution related parties, the management uses a kind of deliberate influence and manipulation of declared earnings through the use of real or accounting methods, whether within the framework of accounting standards or principles, in pursuit of achieving certain objectives and desires. Therefore the reliance of the interest-bearing parties on the accounting earning number without taking into account other factors which lead to a reduction in the level of earning quality would lead to irrational decisions due to a bias in the measurement of income by the management. Despite the role that accounting standards can play in reducing earning management behavior, these efforts are limited, requiring revision of certain accounting rules, practices and standards. This is primarily the responsibility of the bodies involved in the regulation and development of these standards. The study aimed to investigate the extent of earnings management practices in Iraqi companies and the risks they entail by identifying the nature of these processes and their indicators, the methods used in their practice and their implications, and highlighting the effective role played by the auditing profession in reducing earning management practices, which helps to improve performance and contribute to the reduction of earning management practices. The Miller Model was used to measure and demonstrate the extent to which Iraqi corporates practice creative accounting methods when preparing their financial statements. Moreover, a number of descriptive statistics methods that are consistent with the model used to measure profit management in the sample companies were used.