chapter 5 assigment 3

chapter 5 assigment 3 - Fourth, the management could...

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Liyuan liu 102271542 5.23 A First, the management could change the method to evaluate the inventory. Such as during the inflation period, if the methods changed from LIFO to FIFO, there would be a large increase in the net income section. Second, the management could overstate net income by treating deferred revenue as earned revenue. They recognize revenue before it is actually earned. Third, the management could understate current year expenses by claiming they are prepaid expenses. Since prepaid expenses are recorded as an asset rather than an expense, expenses are understated; hence, net income is overstated.
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Unformatted text preview: Fourth, the management could understate depreciation expense to make the company appear more net income. Depreciation expense can be understated by overrating the useful life of asset. Fifth, the management could maintain obsolete assets on the balance sheet so that losses on the disposal of these assets are not record. B Management fraud may occur at the corporate governance level. There maybe one or more members of management to override internal controls and there may be collusion among management, I It could be happened when segregate of duty missing....
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chapter 5 assigment 3 - Fourth, the management could...

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