Tableau Dashboard Activity $11-1($Static$)$ Finding Evidence of Earnings Management in a Tableau Dashboard $[$LO $11-5]$

The Sarbanes$-$Oxley Act of $2002($SOX$)$ was created, in part, to address cases of companies making fraudulent entries to avoid reporting net losses. To find evidence of this kind of earnings management, review the below Tableau dashboard, which includes available data from all U$.$S$.$ public companies for $1985-2017($except banks, financial institutions, and other regulated companies$).$ By following the requirements below, you will discover whether earnings management occurred during certain periods.

Required:

$1.$ The graph displays, for more than $148,000$ company$-$years, each company$$s net income divided by total stockholders$$ equity. By what name is this ratio known?

$2.$ Select the statement that appropriately explains why the graph suggests evidence of earnings management.

$3.$ Using the filter options in the upper right corner of the Tableau dashboard, select the $$pre$-$SOX$$ years $($i$.$e$.,1985-2001)$ to alter the graph to show the number of companies reporting ratios prior to the implementation of SOX.

How many companies reported a ratio near zero $($red bar$)$ in the pre$-$SOX period?

How many companies reported a ratio near $0\mathrm{.}015$ in the pre$-$SOX period?

How many companies reported a ratio near $+0\mathrm{.}015$ in the pre$-$SOX period?

Divide your answer in $3$a by the total of your answers to $3$a$-3$c$.$ What fraction of the companies in $3$a$-3$c reported a ratio near zero $($red bar$)?$

$4.$ Using the filter options in the upper right corner of the Tableau dashboard, select the $$post$-$SOX$$ years $($i$.$e$.,2003-2017)$ to alter the graph to show the number of companies reporting ratios after the implementation of SOX.

How many companies reported a ratio near zero $($red bar$)$ in the post$-$SOX period?

How many companies reported a ratio near $0\mathrm{.}015$ in the post$-$SOX period?

How many companies reported a ratio near $+0\mathrm{.}015$ in the post$-$SOX period?

Divide your answer in $4$a by the total of your answers to $4$a$-4$c$.$ What fraction of the companies in $4$a$-4$c reported a ratio near zero $($red bar$)?$

Do your answers in $3$d and $4$d suggest SOX encouraged a greater proportion of companies to honestly report near$-$zero earnings?