[...]... NU and return on assets Not surprisingly, operating cash flow has negative correlation with MA average accruals The relations between average accruals and performance are nonlinear, except for lagged total accrual CE P TE D [FIGURE 1 ABOUT HERE] 3 Discretionary accrual measurement AC I replicate the results of prior research by using conventional linear accrual models and pooled data as the comparison... Therefore, relaxing the linearity assumption may lead to better specified accrual models 25 ACCEPTED MANUSCRIPT Next, I separately consider instances of positive and negative discretionary accruals and T compare the discretionary accruals for the GAO and the nonrestated groups for both upward IP earnings management (DA>0) and downward earnings management (DA0), and Panels C and D report the T case for firms engaging in downward earnings management (DA . research has examined earnings management via consideration of specific accruals, total accruals, and the decomposition of total accruals to their abnormal and discretionary components. Normal. accruals are considered those accruals that are prone to manipulation (Healy, 1985). The literature has widely investigated the association between discretionary accruals and earnings management. . 2003), I add lagged total accruals as an explanatory variable. Then, I add ROA and change in operating cash flow to control for performance (Ball & Shivakumar, 2006; Kothari et al., 2005;