Refer to the Focus on Fraud feature Common Types of Earnings Management Techniques Involving Accounting Estimates. Why might it be difficult for auditors to disallow companies' preferences to decrease existing reserves? Explain the role of professional skepticism in the context of evaluating management's explanations for their accounting for reserves in this context.
Refer to the Focus on Fraud feature Common Types of Earnings Management Techniques Involving Accounting Estimates. Why might it be difficult for auditors to disallow companies' preferences to decrease existing reserves? Explain the role of professional skepticism in the context of evaluating management's explanations for their accounting for reserves in this context.
Earning Management Techniques
This technique is used the company to improve the quality of the financial statement by adopting certain accounting techniques. This techniques is very much useful to the investors as well as the promoters of the company to analyze the financial statement with better view of quality.
Professional skepticism is an important tools which are used by the auditors to enhance the auditors ability to identify the frauds which are carrying out by the company to misrepresent the details to the stakeholders and response with adequate evidence to reveal such frauds and mislead statement of the companies and given the validated audit report for the same. This techniques used by the auditor in taken consideration of critical assessment in order to make out of the appropriate conclusion for the same. Professional Skepticism in broad sense means that the ability to create the attitude to get a questioning mind set, always being cautions about the fraud and misrepresentation of facts and figures, and critically analyze the evidence which are got while in inspection.
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