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Explain How a Manufacturing Company Can Manipulate Earnings by Including

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Essay

Explain how a manufacturing company can manipulate earnings by including non-production costs in inventories. What does an auditor or financial statement user do to detect this type of manipulation?


Definitions:

Changed Behaviors

Modifications or adjustments in one's actions or reactions as a result of experiences or interventions.

Lewin's Change Model

A theoretical model for understanding organizational or personal change, involving three stages: unfreezing, changing, and refreezing.

Moving

Moving involves changing one's place of residence or location, often involving packing, transportation, and adjustment to a new environment.

New Condition

A status or scenario that differs from the previous state, often implying recent changes or developments.

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