This paper provides evidence whether firms manage and manipulate reported earnings or not around the reforms of accounting institution in year 2000, using financial data of the listed firms at Shang-hai Stock Exchanges from 1998 to 2003 in China. The evidence found in this paper is that firms reduced degree of management and manipulation of reported earnings after the reforms of accounting institution in China based on modified Jones model Ⅱ which is adjusted by dummy variable. Especially, the major questions of this paper are followings. First, whether variables of modified Jones model such as sales, accounts receivable and depreciation assets are working as a surrogate non-discretionary accruals in China? Second, whether absolute value of discretionary accruals is reduced or not after the reforms of accounting institution based on average of two period (1999-2000 and 2001- 2003) around the 2000 reforms of accounting institution in China. This paper demonstrate that the non-discretionary accruals items such as sales, receivable and depreciation assets are not working in modified Jones model Ⅰ because firms try to avoid reporting losses or increase earnings using all items including sales, accounts receivable and depreciation assets in Chinese financial statements. So, variables of modified Jones model Ⅰ such as sales, accounts receivable and depreciation assets seem to be likely discretionary accruals of two period around 2000 reforms of accounting institution. Modified Jones model Ⅰ has 0.068 capacity of explanations only But modified Jones model Ⅱ which is adjusted by dummy variable has 0.135 capacity of explanations. And non-discretionary accruals items such as sales, receivable and depreciation assets are working in modified Jones Ⅱ which is adjusted by dummy variable in China. Conclusively, we found that absolute value of discretionary accruals as surrogates for degree of management and manipulation of reported earnings was reduced significantly after reforms of accounting institution in China based on average at the 0.05 or 0.1 significance level in paired t-test in model Ⅱ which is adjusted by dummy variable. And we identified that firms reduced some degree of management and manipulation of reported earnings after the reforms of accounting institution in China using absolute value of discretionary accruals in model Ⅱ which is adjusted by dummy variable and that firms reduced some degree of management and manipulation of reported earnings after the reforms of accounting institution in China using absolute value of total accruals in this paper.