Final answer:
The most probable method of ethical reasoning to rationalize earnings management is rule-utilitarianism, which supports rules that generally maximize happiness, potentially justifying smoother earnings. Act-utilitarianism, focusing on the consequences of individual acts, and deontological ethics.
Step-by-step explanation:
When considering the method of ethical reasoning that might be used to rationalize earnings management, the most likely candidate is rule-utilitarianism. Rule-utilitarianism suggests that adherence to rules that typically maximize happiness or utility is considered ethically correct. Those in favor of earnings management may argue that if following rules that lead to smoother earnings over time generally provides the greatest good to the most people, then it might be justified.
Act-utilitarianism, by contrast, focuses on the specific consequences of each individual act, not a set of rules. For earnings management, the overall long-term happiness is less of a concern than the immediate benefits or consequences. Therefore, it might be more challenging to justify earnings management under act-utilitarianism as it does not consistently aim to maximize utility with each act.
Deontological ethics, which include theories such as Kant's categorical imperative, would likely disapprove of earnings management, because it typically involves manipulation, potentially violating the duty of honesty and transparency. Deontological approaches adhere more strictly to moral rules, regardless of the consequences.