Read the article “How Are Earnings Managed? Evidence from Auditors” in Accounting Horizons, 2003 (Supplement) and answer the following questions

Purpose:

This assignment will help you to understand:

1. Earnings manages;
2. The most common revenue-recognition abuses in the field; and
3. The impact of revenue-recognition abuses on reported net income.

Task:

Read the article “How Are Earnings Managed? Evidence from Auditors” in Accounting Horizons, 2003 (Supplement) and answer the following questions:

1.      What is earnings management?

2.      What are the specific methods by which earnings management is attempted?

3.      What are the four most common revenue-recognition abuses identified by auditors in that article? From the examples provided in the article, briefly explain each abuse.

4.      Did revenue-recognition abuses tend to increase or decrease net income in the year they occurred?

5.      Did auditors tend to require clients to make adjustments that reduced the revenue-recognition abuses they detected?

Criteria for success:

You will be successful in this assignment if you can:

1.      Provide answers to all of the questions with descriptions that are clear to another reader; and

2.      Obtain related information from the article when construct your responses.