Explain How a Merchandising Company Can Manipulate Earnings Through Its

question 48

Essay

Explain how a merchandising company can manipulate earnings through its year-end inventories. What can an auditor do to detect this type of manipulation?

Define financial risk and identify its sources.

Distinguish between the different types of financial plans and their purposes.

Understand the composition of major current assets and liabilities.

Comprehend the role of finance in business operations and its impact on company objectives.

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Definitions:

Reality Anxiety

The fear or apprehension caused by real, external threats or situations, distinct from neurotic or moral anxiety.

Neurotic Anxiety

is a psychological term for a chronic sense of anxiety that arises from unresolved internal conflicts and anxieties, according to psychoanalytic theory.

Freud

Sigmund Freud, an Austrian neuroscientist who established psychoanalysis as a technique for addressing mental disorders through conversational interactions between a therapist and a patient.

Coping Flexibility

The ability to effectively adapt to and manage stressors in various situations by using different coping strategies.