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    Abnormal Accrual Models: Detect Earnings Management

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    Discuss how the abnormal accrual models in the literature are used to help detect earnings management. These models are widely used in accounting research; provide an example with citation (and link if available), and discuss the major finding and use of the model.
    In your answer explain the concept of an abnormal accrual from the perspective of the accounting research and any other technical terms you refer to that would not be understood by someone who just completed an undergraduate degree in accounting.

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    In the literature, researchers presume that abnormal accruals (unexpectedly high or low given changes in assets or revenue and in the industry) are a proxy for earnings management (Dopuch et al, 2012). That is, accruals for warranties and other estimated future liabilities are judgment calls and so if you want earnings to have a smooth upward curve, you can change an accrual a bit to "smooth" earnings (up or down). However, some work has challenged that assumption. For instance, ...

    Solution Summary

    About 200 words and three academic peer-reviewed articles to support the concepts discussing abnormal accural models used for detecting earnings management.

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