Implications of Earnings Management for Implementation of Sharia Based Financial System

This paper documents the issues of earnings manipulation and their likely impact on sharia based financial system. Methodology includes thorough literature review, analogy and basic document interpretation for conclusion. Findings suggest earnings management is likely a cause of lesser popularity of sharia based financial system. Through regulation, capacity building of auditing professionals, compensating management through stock ownership, creating an environment of job security for managers and financially literate board of directors' earnings management can be minimized which will ultimately help in popularity and implementation of sharia based financial system