Earnings management can reduce the economic content of

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Unformatted text preview: nts. International Financial Reporting Standards - Formulated by the IASB which is a body representing accountants and other interested parties from different countries. Managers • Managerial discretion - improves the economic content of accounting numbers by allowing managers to exercise their skilled judgement and to communicate their private information through their accounting choices and estimates. • Earnings management - can reduce the economic content of financial statements and can reduce confidence in the reporting process. • Typically managers oppose a standard that o Decreases reported earnings o Increases earnings volatility o Discloses competitive information about segments, products, or plans Enforcement tools • Audit opinion o Clean opinion o qualified opinions o Disclaim expressing any opinion • Audit committee - appointed by the board and is represented by moth managers and outsiders. Alternative information sources • Economic, industry and company information • Voluntary disclosure o Expectations adjustment o Signaling - managers are said to disclose good news to increase their companys stock price. Information Intermediaries 1. Information gathering - the researching and gather information about companies that is not readily available 2. Information interpretation 3. Prospective analysis 4. Recommendation Nature and purpose of financial Accounting Desirable Qualities of Accounting information • Relevance - the ca...
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This document was uploaded on 02/24/2014 for the course FMIS 3619 at University of Minnesota Duluth.

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