Equity holdings and the high incentives that are associated with it has often made executives to manipulate their earnings and show high returns so that in turn will help in increasing the share prices of the stock. It is often seen that the companies work on the stakeholder theory that the basic aim of any company is to increase the earnings of the shareholders who have invested in their company and that is possible by providing them with heavy returns. Returns in turn can be increased when the company is doing well, so we see that all of this is interrelated, and high returns leads to better share prices in the market (Abdullah & Said, 2017). This assignment deals with this fact that even the equity holders are manipulating their returns to show that companies are performing well as that would in turn help in improving their business and providing them with the much-needed grounds on which they can trade the shares in the market as increased stock price would mean better returns for the company. It is mentioned that stock price is a function of reported earnings and having good returns is equivalent to better prices which is not always correct in the actual market and that view is analysed in this assignment through the correlation of positive and negative studies that is related to the earnings and management of the same (Belton, 2017).
Positive Theory helps in explaining the fact that accounting research helps in explaining and predicting the actual accounting practices that companies needs to follow. It provides major importance to the vigorous emphasis on the entity’s actual choice of financial techniques. It helps in expanding the horizon of the facts that are related to the accounting institutions. Positive accounting theory is value free, it predicts what people might do rather than letting them know what they should do, and this is how it works (Boghossian, 2017). It assumes the fact that every manager who is working for the company is having a selfish motive associated with his work and their primary aim is to improve their own wealth rather than being concerned about the adverse reactions that it might cause and same is stated here in this context where the aim is to improve the total earnings that the shareholders are getting but that would help in stock prices getting increased (Borit & Olsen, 2012). They aim to manipulate the earnings to show that in turn they are getting better returns and improve their stand in the company. Through research it can be seen that companies are managing their accounting executives in a better manner at the lower level but when it comes to higher level of executives that includes the CEO it can be seen that in companies where they give higher incentives to the executives the level of return that the companies are getting is high in terms of less manipulating the accounts of the companies and manipulating their earnings to show that the overall returns is very high. The accounts are clearer and there is less mistakes in the same (Charles H, et al., 2015).
There are various arguments that can be stated in the favour of the above view point which ranges from self-interest and personal conflicts and better position in the market. Every shareholder is concerned with his benefits and they often manipulate their earnings to show that the companies are performing well so that they get better return in the market. All this leads to heavy manipulation of the accounts of the company and is also misleads the public and in turn affects the share prices of the company giving the wrong picture that the price is high (Coate & Mitschow, 2017). It shows that the price is high and so the equity holders when trade the same they get the best return from the market. The positive accounting theory deals with value free theory where they tell what the shareholders might do rather than stating it clearly what they should do. So, the shareholders are working accordingly making it sure that they do everything for getting better returns which might include manipulation of the accounts of the company on many ends (Covaleski, et al., 2003). So, we see that being a stakeholder involves many personal interests that often might affect the financial position of the company causing adverse reactions in the long run. We can say that companies are performing well when we see that the share prices in the stock market are high but there are many factors that affect these stock prices in the market and management of the same is in the hands of the management of the company (Kaufmann, 2017). They need to see that regulations and framework should be followed and correct accounting should be done, because in case there is mismanagement in the same the companies would be affected very badly. We also see that in case companies do not manage their accounts and the stakeholders manipulate the same, they would be held liable on grounds, but the company would be the one who would be highly affected. So, we see that in real life situations the companies that give high returns to the equity shareholders of the company, the level of manipulation is such cases is very low (Egelund-Mu¨ller, et al., 2017). The shareholders do not need to manipulate the same to get better returns from the company, in case they support the returns of the company they will not manipulate the accounts of the company and manipulate the share prices of the company. Every company works on stakeholder relationship where they aim to improve the returns to the stakeholders as they are the people who are investing in the company but that does not mean that they can be manipulative of the accounts and will provide wrong information to other stakeholders like the public (Yadao, 2018).
So, we see that positive theory is showing arguments against the company in such ways that prices are low, the company needs to regulate the same with shareholders and make sure that proper accounting is followed so that manipulation is less (Webster, 2017). Other cases we see that companies need to manage the same, but main aim should be of the shareholders that they do not indulge in such activities so that the accounts are not manipulated, and correct picture goes out for the people. Both the company and the shareholders are related to each other and thus should be also a major point of concern for the companies (Ghofiqi, 2018). Personal conflicts should be avoided and that can be done by making sure that companies are managing their accounts by following the relevant accounting structure and accounting needs of the legal framework. In case there are issues involved with manipulation of the share prices and the CEO are held guilty for the same then they can be punished, and penalties can be imposed accordingly. So, the aim should be that regulators should try to control this by making rules so that motivation is not there to manipulate the accounts for higher return. The aim for the companies should be that they do not manipulate their accounts and should not encourage the same as that would create a negative impact on the company’s reputation in the market, in which they are to present their information (Iggers, 2018).
Conclusion
Based on the overall analysis it can be said that positive accounting theory is a very vague concept and there is less relevance to the same when it comes to applicability of the same in practical world. There is least amount of assurance that it can provide with relation to the accounts of the company and their authenticity. Thus, the aim as accounting regulators should be to see that correct prices of the stocks are there in the market and correct regulation of the same is done so that companies earn the best return in terms of public support. Public often depends on the stock market to see how the companies are performing based on their share prices and that share prices should not be manipulated by the company nor by the equity shareholders. They should be given good returns and in case they are not provided the same by the company they can sell of the shares rather than manipulating their incomes to show that the return is high by the company so that in turn affects the share prices of the company. The share price is an important indicator of the company position in the market and hence effort must be taken to make sure that there should not be manipulation of the same. For this they need to regulate the companies accounting framework along with the same they need to manage the legal frameworks that governs the share prices of the company. Share prices are affected by many factors but that is also a major factor that affects the company of the company. In case there are issues involved with manipulation of the share prices and the CEO are held guilty for the same then they can be punished, and penalties can be imposed accordingly. Even the people who are involved in accounting and auditing of the same can be held guilty of their work and can be charged in case they fail. Maintaining moral grounds is very important when deadling in such situations where the companies are at the receiving end, So, the aim should be that regulators should try to control this by making rules so that motivation is not there to manipulate the accounts for higher return. The aim for the companies should be that they do not manipulate their accounts and should not encourage the same as that would create a negative impact on the company’s reputation in the market, in which they are to present their information. So, we see that there are many ways in which such kind of scenarios should be avoided and can be regulated it all depends on the company and the stakeholders and the public also. The stakeholders should on no ground manipulate the data of the company. It is their responsibility to keep the data safe and also maintain correct stand on moral grounds.
Working for this assignment was a great learning opportunity and has helped me on many grounds to understand how the companies work and why regulations are such an important part of the same. It can be said that companies need to manage their accounts themselves and get the best returns. It was a great learning experience for me. The best thing that I have learned is how to work in a team where it is important that team management and team unity plays an important part for the company. My strength will include that I was always took a front seat and tried to help and guide my team members in things that they were facing difficulty in. I tried to understand whose part was what in the team and accordingly tried to work as per that. My weakness would be that I have failed on grounds where I was not able manage the team in some serious situations, where there were some conflicts between the team members. This was my first experience of working in a team and hence it was very helpful as it will help me in making a difference when I start doing more team projects. I also understood that while working in a team the opinion of all the team members matters equally and taking the front seat always is not recommended. We also see that there are grounds on which I fail as a team member when I was not able to attend my team meeting and would try that in future such kind of situations will not arise. I would also like to state the fact that my team members were very helpful with me and have always given equal participation in whatever we have done. Individual projects and team projects are two different kind of scenarios and that should be kept in mind. Responsibility should be divided equally, and every member should be aware of his or her part. In case there are issues between the members then they should try to reduce the same and make sure that the project is best, and they get the best results from the professor. This assignment has helped me in learning the techniques of team building and that would be helpful in the future. It has also taught me to be patient at times. In future whenever I do team projects I would try to understand how my team members are thinking and what is there overall view point in certain matters. I would also try to manage my time and try to respect the time of other team mates also and always be in time for meetings and discussion. This was one of a great learning experience for me and has taught me how to work with people and build my people skills and develop better communication skills which will help me in future and make me a better team player along with my peers and will help me grow as an individual also.
This was a great learning opportunity for me and has taught me how to work in teams and in difficult situations. There are lot of issues when it comes to work in teams and that has taught me how to be patient enough in such scenarios. It has helped in making my communication skills better and put across my view points in areas I felt it was important to state the same. It has also helped me in understanding that every person in a team has equal importance and so opinion of everyone matters. It is very different from working individually. My strengths would be that I always respect other people’s opinion and try to understand what my team members are saying and how are they performing and help them in situations when they are stuck. My weakness would be that I am having low patience, so I end up reacting wrongly in critical cases and, I am having less communication skills so at time I am not able to put my points across and communicate with my team members. It is important that team members communicate effectively and hence this team work has helped me in that. It has also helped me to understand my own strengths and weakness and how I am working when I am working individually or as a team member. Team works requires more involvement and that can be given through better communication and better skills that can be developed through more team works. All my team members have helped me a lot and has also helped me in managing my work which would not have been possible without their support. It was a great experience to work in a team and I will always remember that when in future I do team projects. In future I would try to communicate more with my team members, keep my calm in hard situations and see to it that it does not affect my groups work. In case the team works nicely everyone would be benefited by the same so that should be the aim. I will also try to communicate with other people and try to learn from them. There are good and bad skills in everyone, so I would try to learn the same and manage my work with their help and help them in return. It should also be there I would try to take these points and apply the same when I work in the future and make it applicable for other people also. This was a great opportunity to learn and I would be thankful to my team members that they have helped me so much and I would also do the same when I work in future. . It has also help me in developing my leadership skills based on which I can lead a team in serious and difficult situations, it has also taught me how one can keep their patience and this I shall apply in my further work.
References
Abdullah, W. & Said, R., 2017. Religious, Educational Background and Corporate Crime Tolerance by Accounting Professionals. State-of-the-Art Theories and Empirical Evidence, pp. 129-149.
Belton, P., 2017. Competitive Strategy: Creating and Sustaining Superior Performance. London: Macat International ltd.
Boghossian, P., 2017. The Socratic method, defeasibility, and doxastic responsibility. Educational Philosophy and Theory, 50(3), pp. 244-253.
Borit, M. & Olsen, P., 2012. Evaluation framework for regulatory requirements related to data recording and traceability designed to prevent illegal, unreported and unregulated fishing. Marine Policy, 36(1), pp. 96-102.
Charles H, C., Giovanna, M., Dennis M, P. & Robin W, R., 2015. CSR disclosure: the more things change…?. Accounting, Auditing & Accountability Journal, 28(1), pp. 14-35.
Coate, C. & Mitschow, M., 2017. Luca Pacioli and the Role of Accounting and Business: Early Lessons in Social Responsibility. s.l.:s.n.
Covaleski, M., Evans, J., Luft, J. & Shields, M., 2003. Budegting Research Three Theoretical Prespectives and Criteria for selective Integration. Journal of Management Accounting Research, 15(3), pp. 3-49.
Egelund-Mu¨ller, B., Elsman, M., Henglein, F. & Ross, O., 2017. Automated Execution of Financial Contracts on Blockchains. Bus Inf Syst Eng, 59(6), pp. 457-467.
Ghofiqi, M., 2018. Formation of views and interests to the accountants profession in master of accounting students of jember university force of 2016 using structuration theory analysis. the 3rd international conference on economics, business, and accounting studies.
Iggers, J., 2018. Good News, Bad News: Journalism Ethics And The Public Interest. s.l.:s.n.
Kaufmann, W., 2017. The Problem of Regulatory Unreasonableness. First ed. New York: Routledge.
Webster, T., 2017. Successful Ethical Decision-Making Practices from the Professional Accountants’ Perspective. ProQuest Dissertations Publishing.
Yadao, J., 2018. Forensic accountants and big data.
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