Earnings Management as a Tool of Bankruptcy Prevention during Global Pandemic of COVID-19

Abstract

Research background: The Covid-19 pandemic affects all areas of operation in almost every country, except for Slovakia. In Slovakia, radical measures were taken in the first phase of March, and the state of emergency required the closure of gastronomic establishments, service operations, restrictions on shops, stricter hygiene measures and restrictions on free cross-border as well as a national movement. The second phase is foreseen in the autumn, which should be much more demanding, and it will also be a great challenge for companies to be able to adapt their activities to the new standards. An important question for companies is how this will affect their financial results. Some companies were not affected by the disease; others had to be closed, did not generate any profit, eventually went bankrupt. Purpose of the article: The purpose of this article is primarily to examine the impact of coronavirus on earnings management and how it will affect further decision-making within the company. In our study, we focused on the impact that Covid-19 has or will have on the management of companies in Slovakia. A total of 172 companies in Slovakia operating in various sectors were interviewed Methods: The methodology used standard questionnaire survey procedures with scale answers. We addressed companies, despite the sector in which they operate. The overall return was 20%, and we obtained 172 responses. Findings & Value added: Because the consequences of the Covid-19 disease are not yet evident, managers within earning management will also count on reserves in the form of savings accounts more than before.

Risk Assessment With Audit Tool and Linked Archive System (ATLAS) Methods on Going-Concern During The Covid-19 Pandemic

“…The study results [12] stated that many companies experienced an economic crisis during the covid-19 pandemic. The company experienced cash flow problems resulting from sales that continued to decline, a decrease in market capitalization value [11].…”

Earnings Quality Research: Trend, Recent Evidence and Future Direction

“…Lastly, the recent global pandemic has also increased research on EQ. Studies (such as Ozili, 2021;Xiao and Xi, 2021;Usheva and Vagner, 2021;Maheen, 2021;Cui et al, 2021) have attempted to examine the effect of the pandemic on the financial reporting.…”

Cash Flow Projection Analysis on Company’s Going-Concern During the Covid-19 Pandemic

“…The study's results [13] stated that many companies experienced an economic crisis during the covid-19 pandemic. The company experienced cash flow problems due to sales that continued to decline and a decrease in market capitalization value [12].…”

“…Finally, advertising, trading, communication services, and health clinic company are in nonbankrupt condition. The company is said to be bankrupt if the company experiences mild difficulties (such as liquidity problems) and more severe difficulties, namely solvency, debt is greater than assets [12]. Financial distress is a condition that shows the decline in the company's financial condition that has not yet occurred in bankruptcy or liquidation.…”