Accruals Are Potentially Troublesome Because

question 7

Multiple Choice

Accruals are potentially troublesome because:

• A) They can lead to giving an unmodified audit opinion when it should have been modified
• B) They provide an opportunity to manage earnings through aggressive or more conservative estimations
• C) They always lead to fraud in financial statements
• D) They provide an opportunity to shift debt off the books by setting up an SPE

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Definitions:

Total Utility

The overall satisfaction or pleasure a consumer derives from consuming a certain quantity of goods or services.

Marginal Utility

The extra fulfillment or advantage a person gains by consuming an additional unit of a product or service.

Satisfaction

The feeling of pleasure or fulfillment that comes from achieving a goal or satisfying a need.