Formulating an Ethical Accounting Model in Relation to Earnings Management and Tone Management: A Mixed-Methods Study

Based on the opportunistic earnings management approach, companies engaging in earnings management use optimistic tone in financial reporting, while those that do not engage—or engage minimally—in earnings management tend to employ a pessimistic tone. This is because managers prefer to disclose information regarding positive company performance and highlight their successes, while concealing data associated with poor performance. This issue imposes a form of ethical burden on managers. Considering this and the importance of professional ethics in accounting, the primary question of this study is: What is the model of professional ethical accounting and its relationship with earnings management and tone management? In other words, which indicators of professional accounting ethics can influence earnings management and tone management, and what is the relationship among them? This research utilized a mixed-methods approach (qualitative–quantitative), incorporating grounded conceptual theory and structural modeling. The statistical population and sample consisted of members of the Iranian Association of Certified Public Accountants, independent auditors, auditors from the Supreme Audit Court, and managers of business entities. In this study, after conducting 10 semi-structured interviews, data analysis reached theoretical saturation. In the quantitative phase, the statistical population included auditors working at the Supreme Audit Court, several financial managers of commercial companies, members of the Iranian Association of Certified Public Accountants, and members of the audit community. Given the size of the population, a two-stage cluster sampling method was employed. Following the interviews, 346 initial codes were extracted from the transcripts. Through the coding of these concepts, 64 sub-themes were identified. By categorizing these sub-themes into similar groups, 11 main themes were finalized. Subsequently, a sample of 134 accountants was selected for the quantitative phase, from whom survey data were collected via questionnaire to test the research model. The results of the Partial Least Squares (PLS) technique fully validated the model.