The artificial making of reports by twisting the numbers as per requirements and making them what they are actually has not proven accounting as a deterministic science. To avoid these malfunctions, accounting standards are created to lend uniformity to the reports of different companies. Earnings management is defined as implementing intentional window dressing to the numbers to meet the desired objectives set by the management.

Accounting is not a deterministic science. This gives ample scope for twisting the numbers and making them appear what they are not. For this reason, there are many accounting standards (Collectively called GAAP) which the companies adopt for the purpose of financial reporting, which enable financial statements reported by different companies to have some degree of uniformity. However, the accounting standards themselves are flexible, permitting a shrewd management to twist the standards to suit their requirements. The process of intentionally window-dressing numbers to meet the desired objective is called earnings management. These objectives could either be set by the management themselves, or to meet analysts' expectation, or for any other reason.

While Earnings Management may be practiced in various forms, more often than not it is in the form of Aggressive Accounting. Aggressive Accounting typically means using the flexibility in GAAP to meet the desired objective. They may not be categorized as fraudulent till it is proven by a higher authority that the company deliberately reported false statements with the clear intention of misleading the investing public.

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