Politics Corrupts Accounting (Shocked!)
As if you needed another reason to suspect earnings management.
New research shows that companies making political contributions often bend accounting rules so as not to embarrass their candidate.
Companies “involved in potentially controversial business activities—outsourcing, for example—understate their earnings if it might boost a candidate’s chances of election,” according to a study at the Harvard Business School called “Accounting Information as Political Currency.”
Such earnings management “seems to have been motivated by the desire of contributing firms to not taint preferred candidates with association to the political red flag… outsourcing… as well as to ensure future benefits and avoid future costs in regulatory matters.”
Or, as Claude Rains says in “Casablanca:” “I’m shocked. Shocked!”
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