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ABSTRACT
The paper examines the influence of aspects of two aspects of workplace spirituality on earnings management motivations. The aspects are (1) spiritual awakening on the individual level; and (2) organizational spirituality at the organizational level. Empirical analysis confirmed that the two aspects are different constructs that exist at different levels. The findings suggest that workplace spirituality gives individuals a new perception about their lives and selves, enables them to acknowledge self-group relationships, and affects their actions. Furthermore, it was found that spiritual awareness has a mediating effect between organizational spirituality and earnings management, which is greater than the direct effect of organizational spirituality on earnings management motivations. Results show no significant variances in the awareness of workplace spirituality among people with different religious beliefs. The results also indicate that a sole reliance on the realization of individual ethics may not be sufficient to amend the current chaos regarding earnings management.
Keywords: Earnings management, workplace spirituality, earnings management motivations
1. INTRODUCTION
In recent years, there has been an increase in the number of corporate frauds around the world. Many of these incidents involve false financial reporting, irregular transactions, inflated revenues, and asset embezzlement. One result is that investors lose confidence in the management teams and financial reports of many listed companies. Although government authorities that regulate securities exchanges and auditing industries have established laws and regulations to prevent fraud, have levied punitive measures on unscrupulous behaviors, and have devoted great effort to educate individuals about business ethics, the financial tsunami in 2008 left financial industries around the world in shambles. As a consequence, the public now has even more doubts about the professional ethics of corporate management and auditors.
The practice of altering transactions and financial reports to mislead investors into believing reported corporate performances and to influence contract results using falsified accounting books is called earnings management [Healy and Wahlen, 1999; Daniel, 2010]. Most discussions of earnings management focus on the financial perspectives, but earnings management reflects the interests of management rather than the real operating results of companies. Earnings management is in fact a managerial behavior, not a mere financial variation [Goel and Thakor, 2003; Chung, Firth and Kim, 2002]. For this reason, many studies have suggested that these issues should...