Which of the Following Statements Apply to Political Cost Hypothesis

question 19

Multiple Choice

Which of the following statements apply to political cost hypothesis?

• A) Political costs arise as a result of an entity's relationships with shareholders and lenders.
• B) Managers would prefer accounting policies that increase profit in order to compensate for political costs.
• C) Smaller entities are more likely to be the target of lobby groups.
• D) Managers of larger entities are more likely to choose accounting policies that reduce profit in order to avoid political costs.

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