Abstract: The purpose of the design of the discretionary accrual models is to reduce the estimation efforts of the non-discretionary part of the accrual to the minimum. This paper reviews the design of the key variables of the model evolution and the selection of the model type, as well as the market application effects of different models. It is found that the capability of the model to separate the accrual has not been improved along with its development; while the practice of the specific accrual that the non-discretionary part is estimated on the basis of the non-accounting factors has less errors than the total accrual that the non-discretionary part is estimated on the basis of the accounting factors. Furthermore study finds that by checking the changes of the model fitting effects after excluding the specific accrual from the aggregate accrual, the manipulation of the excluded specific annual can be verified. Therefore, the exclusive method can be chosen as the breakthrough to lower the estimation error and improve the explanation power of the model.

Key words: discretionary accruals; proxy variables; estimation error