EARNINGS MANAGEMENT AND ISLAM

Abstract

This article, by applying five Islamic concepts (Fitrah, Akhlaq, Niyyah, Ijtihad and Maslahah), seeks for a solution of the problem of earnings management conducted by the managers. By analyzing several definitions of earnings management it can be found that managers’ wrong/unethical intention is the main cause behind this problem. The article suggests that if the intention (Niyyah) of the managers can be purified through ethical training (Akhlaq), then it can be expected that they will apply their highest possible effort and knowledge (Ijtihad) in order to ensure the interests of the stakeholders (Maslahah). This can be a possible solution for the problem of earnings management.