Answered: activities need judgment in preparing…

Business

Accounting

activities need judgment in preparing the accounting earnings

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter4: Ethical Responsibilities Of Accountants

Section4.8: Dell Inc.

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Question

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?

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