EMBEDDING A GROUP PROJECT INTO INTERMEDIATE ACCOUNTING TO TEACH THE ETHICS OF EARNINGS MANAGEMENT

Abstract

We propose a novel pedagogic design to integrate teaching earnings management and accounting ethics at the undergraduate level. Earnings management is an extensive topic related to almost every topic in collegiate accounting education. Generally Accepted Accounting Principles (GAAP) give accountants discretion to exercise professional judgment on how to report earnings. The ethicality of earnings management has its profound pedagogical challenges. This flexibility exposes many ethical dimensions for professional training. The interaction of earnings management and accounting ethics offers a particular perspective to design a course project module to integrate the detection of earnings management schema and its ethicality. We follow the accounting ethics pedagogic framework (Apostolou & Schleifer, 2013) to demonstrate and validate our course design: (1) assess the need to embed the ethicality of earnings management in the curriculum; (2) articulate learning objectives; (3) identify the nature of the content; (4) select suitable delivery modes; and (5) conduct learning assessment. The paper has three contributions to accounting ethics education. First, the proposed course module offers a solution to relieve the limited space in the curriculum to train accounting ethics. Second, the ethicality of earnings management can act as a bridge to integrating ethical accounting decision-making and professional judgment. Third, the course design offers a virtual platform to engage the instructor and students in exploring the boundary of positive and fraudulent earnings management.