We have so far discussed accounting estimations for accounts receivables, inventory, and long-term assets. We may also observe that managers have discretions in estimating the related expenses to manipulate corporate earnings. Earnings management refers to the activities of manipulating financial records to improve the appearance of a company's financial position. It has presented significant ethical concerns for investors in the capital markets. Please read the attached article (Dechev et al. 2009) about earnings management and share your thoughts on the following questions:

1. What are the characteristics of high-quality earnings?

2.Why managers misrepresent earnings?

3. Could you identify one or two red flags of earnings management and explain what types of transactions/activities may generate these red flags?

Answer rating: 100% (QA)

Answer Certainly without access to the specific article I can offer general insights on the questions you posed 1 Characteristics of HighQuality Earni... View the full answer