1. In recent years, publicly traded companies are under pressure to meet or beat the analysts consensus earnings estimates in their quarterly reports because the market will punish those that fail to deliver expected earnings. Thus, managers tend to utilize many methods to improve reported profitability that are cosmetic in nature and do not affect "real" operating performance to meet market expectations. These methods are referred as earnings management (commonly called cooking the books). Managers have different motivations to engage in earnings management, and they usually defend their actions including the following arguments: (1)Increasing stock price by managing earnings benefits stockholders; no one is hurt by these actions, (2) Earnings management is a temporary fix; such actions will be curtailed once real profitability improves, as managers expect. So, what are the affected parties in schemes above to manage profits to prop up stock price? Do the ends of earnings management justify the means? What governance structure you think to curb earnings management and increase the reporting quality? Please discuss.