A number of prior studies use a sample of detected accounting irregularities, e.g., SEC's enforcement actions and class-action lawsuits, to predict the likelihood of accounting violations. The ability of these models to correctly identify potential violations is inhibited by the fact that all...

This paper investigates potential cases of earnings management by observing the pattern of quarterly earnings changes. We identify firms for which the sign of (seasonal) earnings changes observed in interim quarters reverses in the fourth quarter. We hypothesize that a firm performing poorly in...