Which of the Following Is Not a Reason Why the Auditor

question 75

Multiple Choice

Which of the following is not a reason why the auditor needs to take special care to review significant estimates in the financial statements?

• A) Organizations may try to use the estimates to "smooth" earnings.
• B) Organizations may create hidden reserves in unusually good years that can be used in years when real profits do not meet expectations.
• C) Companies may underestimate liabilities or impairment of asset values to achieve reported earning goals in years when real profits to not meet expectations.
• D) Companies may try to overestimate liabilities in computing leverage ratios.

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Definitions:

Random Variable X

A specific random variable denoted by "X", representing a numerical outcome of a random process.

Managerial Positions

Roles within an organization that are responsible for overseeing, directing, and planning the work of others and making strategic decisions.

Expected Value

The average outcome of a random variable, calculated as a weighted average of all possible values.

Number Of Clients

The total count of individuals or entities that receive services or goods from a business or organization.