The Earnings Management Technique That Is Being Used When a Company

question 69

Multiple Choice

The earnings management technique that is being used when a company records an overly large liability for a potential lawsuit against it, during a year when profits are good, and later corrects this liability in a year with low profits, is

• A) Taking a big bath
• B) Real earnings management
• C) Abusing materiality
• D) Using a cookie jar reserve

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Definitions:

Descriptive Statistics

Statistical methods that summarize and organize the properties of a set of data.

Summarise and Organise Data

The process of simplifying and arranging collected information or data into a structured form, typically to make it more accessible or easier to understand for analysis or presentation.

Inferential Statistics

A branch of statistics that allows one to make predictions or inferences about a population based on a sample of data.

Extreme Scores

Values on a measurement scale that are significantly higher or lower than the majority of scores.