Research
Florida Atlantic University’s Center for Forensic Accounting conducts research, in addition to education and other activities, on fraud and economic crime. Our research can be used for public awareness and by government for law enforcement and policy making.
Published research includes findings on Internet Crime. Our research can be found using the link on this page.
Accounting quality
The Center is examining trends in accounting quality especially in terms of accounting
manipulation. The main purpose of financial accounting is to provide information about
a firm to external investors (equity investors and lenders) so they can make informed
decisions such as buying shares of stock, making a loan, and so on. Lower quality
accounting information may cause investors to make bad decisions leading to losses
of money. Accounting quality matters. The quality of financial information prepared
by businesses and used by investors varies. Even though U.S. Generally Accepted Accounting
Principles (U.S. GAAP) provide guidance to firms in preparing financial information,
the quality of the information varies over a continuum. Accounting quality is not
binary of good or bad any more than the quality of a particular automobile is binary.
From the perspective of users of financial information, obviously they prefer higher
quality information than lower quality.
Accounting quality can vary for multiple reasons. On one extreme, managers may intentionally mislead investors by issuing fraudulent financial statements (e.g., Enron and Healthsouth accounting frauds) that, for instance, makes a firm appear more healthy than reality. Such conduct may rise to the level of criminal. A more common reason for lower quality accounting information is managers manipulating their financial statements in some degree to increase earnings for the current time period or defer earnings to a later period. Such conduct may not rise to the level of criminality or, if it does, it may not be prosecuted.