Question

The SEC has criticized the auditing profession for not looking at significant changes in accounting estimates. For example, a reserve (liability estimate) may be estimated very high one year and then very low the next year. Explain how an accounting estimate might not be materially misstated for two consecutive years, but because of the swing in the accounting estimate, net income could be misstated by a material amount.



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  • CreatedSeptember 22, 2014
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