Earnings Management In Accounting Quiz!

10 Questions | Total Attempts: 2582

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Earnings Management In Accounting Quiz! - Quiz

What is earnings management in accounting? Enhance your understanding of earnings management with this quiz. Earnings management is a way of manipulating financial records to improve the appearance of the company’s financial position. Businesses use earnings management to present consistent profits and balance out the earnings fluctuations. It aims to attain some personal gain. If you are curious to discover more about earnings management in accounting, look no further than this quiz.


Questions and Answers
  • 1. 
    What other names are given to earning management?
    • A. 

      Borrowing from the future

    • B. 

      Aggressive accounting

    • C. 

      Income Smoothing

    • D. 

      All of the above

  • 2. 
    Is Pro-forma efficient, and why?
    • A. 

      Yes, portrays the firms' performance in comparison.

    • B. 

      No, it discloses too much information, and the firm loses its' competitive advantage over the rival company.

    • C. 

      No, it does not provide adequate information to an investor for them to make a decision regarding the future performance of the firm.

    • D. 

      I don’t know. Ask the Professor.

  • 3. 
    What benefits managers when excessive provisions for low-persistence special items are frequently recorded?
    • A. 

      It increases future operating earnings.

    • B. 

      It does not affect the manager's performance compensation.

    • C. 

      It increases the manager's bonus.

    • D. 

      A and B

  • 4. 
    Clear reporting of revenue recognition policies and detailed descriptions of low-persistence items and major discretionary accruals (such as writedowns and provisions for reorganization) will bring earnings management into the open.Which of the following statements are true?
    • A. 

      This type of reporting shall increase managers' ability to manipulate and bias the financial statements for their own advantage.

    • B. 

      This type of reporting shall decrease the manager's ability to manipulate and bias the financial statements for their own advantage.

    • C. 

      This type of reporting is bad for investors. The intricate information would just confuse them.

    • D. 

      All of the adobe

  • 5. 
    Earnings Management is “ the choice by a manager of accounting policies, or real actions, affecting earnings so as to achieve some reported earnings objective.”
    • A. 

      True

    • B. 

      False

  • 6. 
    An “ iron law” that surrounds accrual-based earnings management
    • A. 

      Accruals management

    • B. 

      Income smoothing

    • C. 

      Accruals reverse

    • D. 

      Income smoothing

  • 7. 
    Which one of these is a pattern of earnings management?
    • A. 

      Income Management

    • B. 

      Taking a bath

    • C. 

      A and B are true

    • D. 

      None of the above

  • 8. 
    Managers are motivated to manipulate income with earnings management.  Which of the following is a (rare) reason(s) for them engaging in this kind of behavior?
    • A. 

      Reduce the company's visibility

    • B. 

      Raise the price of an initial public offering

    • C. 

      Reduce the probability of covenant violation

    • D. 

      All of the above

  • 9. 
    Earnings management is good when the environment is volatile, and there's a lot of insider information.
    • A. 

      True

    • B. 

      False

  • 10. 
    Income Management is the most recognized pattern of earnings management.
    • A. 

      True

    • B. 

      False

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