A)Differentiate between traditional reporting and Integrated reporting. B) Evaluate earnings management and identify TWO (2) techniques use in earnings management. C) Discuss what are the factors that can influence managers to practice unethical behaviour such as fraud.

A)Differentiate between traditional reporting and Integrated reporting. B) Evaluate earnings management and identify TWO (2) techniques use in earnings management. C) Discuss what are the factors that can influence managers to practice unethical behaviour such as fraud.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter2: The Auditor’s Responsibilities Regarding Fraud And Mechanisms To Address Fraud: Regulation And Corporate Governance

Section: Chapter Questions

Problem 3CYBK

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A)Differentiate between traditional reporting and Integrated reporting.

B) Evaluate earnings management and identify TWO (2) techniques use in earnings management.

C) Discuss what are the factors that can influence managers to practice unethical behaviour such as fraud.

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Reported accounting earnings provide valuable information to investors, lenders and regulators. Reported income is also important for executive bonus. Yet, within the structure of GAAP, managers can use judgment in computing accounting earnings and in structuring transactions. In other words, managers can engage in earnings management. What activities need judgment in preparing the accounting earnings? What safeguards can you suggest for reducing or preventing harmful earnings management intended to mislead investors and the market?
Evaluate the following statements from an ethical perspective:“Earnings management in a narrow sense is the behavior of management to play with the discretionary accrual component to determine high or low earnings.”“Earnings are potentially managed, because financial accounting standards still provide alternative methods.”
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