As William is preparing the end of year financial statements, he notices that the numbers required for his personal bonus have not been met. 

He begins to review the estimates that he has made in order to possibly adjust some numbers to meet the requirements for his bonus. This is an example of:

• Meeting internal targets
• Income smoothing
• Meeting external expectationsExcessive earnings management typically begins as a result of:

• A violation of generally accepted accounting principles
• Pressure to meet the expectations of stakeholders
• A regulatory investigation
• A downturn in business

The GAAP Oval best represents:

• The fact that GAAP is not subject to interpretation
• The flexibility managers have within GAAP to report one earnings number from among many possibilities
• The philosophy that earnings management within limits is ethical
• The fact that only one true earnings number exists

The Sarbanes-Oxley Act establishes:

• Independent oversight of auditors
• Constraints on auditors
• Constraints on company management
• All of these are correct

The Public Company Accounting Oversight Board:

• Establishes requirements for entry into the CPA profession
• Enforces compliance with the Foreign Corrupt Practices Act
• Conducts inspections of accounting firms
• Reviews tax returns of public companies

According to Sarbanes-Oxley, who are auditors required to report to and be retained by?

• Chief Financial Officer
• Internal auditors
• Audit committee
• Chief Executive Officer

Which of the following activities would internal auditors not typically perform in a large company?

• Assist with increasing the efficiency of operations
• Evaluate internal controls
• Prepare the primary financial statements
• Detect fraud

External audits are performed by:

• Certified Public Accountants
• Certified Financial Analysts
• Certified Internal Auditors
• Certified Management Accountants

Which of the following audit processes is used primarily by external auditors?

• Sampling
• Interviews
• Observations
• Confirmation
• Analytical procedures
• All of the above

Which of the following is a factor that influences auditors to remain independent and to provide fair and reliable financial information?

• Management would be taking a large legal risk if they interfere with the auditors.
• External auditors are taking a large legal risk if they allow their independence and integrity to be compromised.
• Auditors have a reputation to protect.
• All of these are correct.

 

• Window dressing

Answer rating: 100% (QA)

This is an example of income smoothing Income smoothing is the practice of manipulating financial statements to even out the fluctuations of income over time In this case William is adjusting estimate... View the full answer