Which of the Following Best Defines the Term Earnings Management

question 16

Multiple Choice

Which of the following best defines the term earnings management?

• A) It is the intervention by the management in the internal financial reporting process, with the intent of boosting the earnings of an organization.
• B) It is the purposeful intervention in the external financial reporting process, with the intent of obtaining some private gain.
• C) It is the legitimate alteration of internal reports by the management to influence contractual outcomes that depend on reported accounting numbers.
• D) It is a systematic management of earnings of an organization by its external shareholders, with the intent of increasing future profits.

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Definitions:

Stimulus

Any object, event, or environmental condition that can provoke a physiological or psychological response.

Response

Any behavior of a living organism that results from an external or internal stimulus.

Behaviorists

Psychologists who focus on observable behaviors and the ways in which learning influences behavior, often excluding thoughts and feelings from their analysis.

Determined

Possessing a strong motivation or resolve; having a firm decision to do something.