the effect of islamic beliefs on the earnings management

there is an increasing concern among financial statements users about the frauds occurring in the business organizations. the unexpected collapse of corporate giants such as enron and worldcom has driven those interested to pay more attention to the unethical practices in accounting systems. the phenomenon of earnings management is seen as one of the most controversial issues facing the accounting profession during the last few decades. it has been argued that earnings management misleads the users of financial statements. this is because when the managers alter earnings, the financial statements do not accurately reflect the economic wealth of the company, which ultimately leads to the gross violation of stakeholders' trust. the objective of this paper is firstly to address the ethical issue of earnings management and evaluate the related research progress where a structural framework based on islamic beliefs can provide some insights into the behavioral pattern and economic actions that could be undertaken to reduce or eliminate the practice of earnings management. hence, the paper proposes a structural framework of islamic beliefs and the practice of earnings management (derived from the quran and sunna) that function as guidance for managers towards a more proper manner.