In a study of how managers attempt to manage earnings, researchers analyzed a sample of 515 earnings- management attempts from a survey of experienced auditors. The frequency of effects is summarized
in the table shown. Research question: At α = .01, is the effect on earnings independent of the approach used?
Current-Period Income Effect of Four Earnings Management Approaches
Increase Decrease No Clear Effect Total
Expenses and Other Losses 133 113 23 269
Revenue and Other Gains 86 20 8 114
Business Combinations 12 22 33 67
Other Approaches 41 4 20 65
Col Total 272 159 84 515
The solution examines the current-period income effect of four earnings management approaches. The frequency of the effects is used for these calculations.