Imagine that you are investors of a
profitable company. But they don't tell
you everything they know. Suddenly this
company went bankrupt and their shares
plummeted. When their shares plummeted the company collapsed. So this company
was manipulating accounts to report constant profits to increase share prices.
This is known as earnings management.
When this company collapsed more than
4,000 people lost their jobs. Investors
was more than 60 billion dollars.
Now you may be asking whether this could happen
in smaller private firms? The answer is yes.
As you can see from my slide, both
publicly listed companies and private
firms of all sizes may fiddle their
books to reach certain profit targets.
But private firms do not trade their
shares on the market so maybe they
are more motivated to report the lower
profits to avoid taxes just like some of
us may do. But when this happens all
of us are affected.
Because if government have less money they may cut social services or increase taxes
and because any type of manipulation affects all of
us it is important to understand why
companies manipulate their profits. 
This brings us to the question of my PhD,
Does size matter? When it comes to the
regulation in the UK, audit and reporting
requirements for the private firms are
based on size and most importantly
size determines how much detail private
firms have to report and whether their
accounts need to be inspected by
auditors.
Also research suggests that size is really important factor to
consider because motivations and kinds of manipulation may vary.
How they may vary? They may vary by size among
other factors. To further complicate the
issue, regulation changes over time as
the thresholds that determine size and
this aspect is often overlooked.
So my research will consider this change in size thresholds when defining company
size and I will compare profit
manipulations between
small, medium and large private firms
with those of publicly listed companies.
The aim is to find out if the size really
matters and I will do that by
analyzing financial reports of the UK
companies and comparing the reported
profits which report with profits
without manipulation in relation to a
certain profit targets. But by revealing
if size really matters my research will
hopefully help regulators to reduce
financial fraud and will advance
understanding of the private firms in
the UK.
Thank you
