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The Concept of Earnings Management

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Examine the concept of earnings management. Determine how it can impact the quality of earnings.

Consider the following: Significant reversals of discretionary accruals in the fourth quarter may be one indicator of earnings management or smoothing of income.

Analyze reasons companies employ this technique.

1. Determine the best reason to employ this technique and defend your answer.
2. Evaluate the impact of earnings management on financial markets and stockholder confidence.

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Solution Summary

Examine the concept of earnings management. Determine how it can impact the quality of earnings.

Consider the following: Significant reversals of discretionary accruals in the fourth quarter may be one indicator of earnings management or smoothing of income.

Analyze reasons companies employ this technique.

1. Determine the best reason to employ this technique and defend your answer.
2. Evaluate the impact of earnings management on financial markets and stockholder confidence.

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Examine the concept of earnings management. Determine how it can impact the quality of earnings.

Consider the following: Significant reversals of discretionary accruals in the fourth quarter may be one indicator of earnings management or smoothing of income.

Analyze reasons companies employ this technique.

1. Determine the best reason to employ this technique and defend your answer.
2. Evaluate the impact of earnings management on financial markets and stockholder confidence.

Consider the following: Significant reversals of discretionary accruals in the fourth quarter may be one indicator of earnings management or smoothing of income.

That's correct. The fourth quarter marks the end of the year. Companies at that time are trying to boost income for several reasons, if they need to. Many companies have to meet certain ...

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