Earning management arise when managers use judgmental decision making in financial reporting and structuring of transactions. Most of the alterations which are being done are meant to mislead some stakeholders on underlying economic performances of organizations or it is geared to influence contractual outcome which mainly depend on the accounting reports being done. Earning management has been used to fraud organizations by increasing or decreasing profits, revenues or the earning being realized per share (Thompxson, 2009).
This study will help determine the next cause of action that the government of Saudi Arabia should execute on firms found misrepresenting reports that have cooked books. How this kind of fraud can be combated and the right law systems that can enact and enforce laws that would help curb this endeavor by the fraudsters (Giroux, 2003).
These heinous acts have to be ceased and those who commit them brought to book for the economical welfare of the Saudi Arabia government and the commerce of the country smooth running and so to build the lost confidence of investors who have been sacred off by this acts of enrichment by scrupulous business men conning off investors and building a bad image for the capital market of this state. Strict measures should be placed upon so as to combat those who are into these acts (Coleman, 2005). Law should be enforced in this sector so as to streamline the welfare of not only the investors but the consumers, because inferior service and goods are provided to them because of the economical nature and the greed full attitude portrayed by these firms.
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