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+--- Thread: earnings manipulations (/showthread.php?tid=9225)
earnings manipulations - hammodi050 - 12-07-2010
can you explain what does it mean this statement
âMost earnings manipulations are perpetrated by misestimating the multitude of provisions and reserves underlying earnings computations and by exploiting the vulnerabilities inherent in the accepted accounting framework.â
if you have an example it cloud be better
- asadlarik3 - 12-08-2010
1)Provisions and reserves and
2)vulnerablities of framework.
Provisions and reserves are those where judgement of management is involved, they can increase certain provisions and deccrease certain reserves to achieve incresed net profit for the period and vice versa.
Auditor should check the reasonableness of these estimates based on circumstances in which it was applied such as similar estimates in industry, historical data, pressure's on company.
2) vulnerablities of framework- find opportunities to gain undue advantage of any flexibility or flaw in the framework used (e.g the IAS)