Earnings Management and Financial Reporting: A Review of Techniques and Consequences

Abstract

The discussion of this review of works in the field of earnings management explains the contemporary setting of this research topic by undertaking the means by which firms use it and the effect on quality of financial reporting. We combine findings of 30 studies on accrual-based and real earnings management practices in a diverse sample of international markets published in 2023–2024. We discuss how detection methods, including machine learning, have developed and how corporate governance may be applied to restrict opportunistic reporting practices. According to the review, it implies that there are pertinent implications on the decision-making of stakeholders, the efficiency of the marketplace, and the regulation. The important findings indicate that the management of real earnings becomes more common, the forms of detection are increasingly more advanced and performance of various forms of governance mechanisms in various institutional circumstances is different. We observe convergence of earnings management and ESG reporting, the use of technology to aid in detection and inconsistency of effective regulation in institutional settings. The relevance of the review lies in the fact that it provides a systematic method of understanding the present earnings management scale of practice and its impacts on financial reporting transparency and offers future-policy development and research suggestions.