Problem Two: Earnings Management

Essay

Problem Two: Earnings Management
Earnings management can be defined as the "purposeful intervention by management in the earnings process, usually to satisfy selfish objectives" (Schipper, 1989).
Earnings management techniques can be separated into those that are "cosmetic" (without cash flow consequences) and those that are "real" (with cash flow consequences).
The management of a company wishes to increase earnings this period.
List three "cosmetic" and three "real" techniques that can be used to achieve this objective and explain why they will achieve the objective.