In a study of how managers attempt to manage earnings, researchers analyzed a sample of 515 earnings-management attempts from a survey of experienced auditors. The frequency of effects is summarized in the table shown. Research question: At α = .01, is the effect on earn- ings independent of the approach used? (Data are from Mark W. Nelson, John A. Elliott, and Robin L. Tarpley, "How Are Earnings Managed? Examples from Auditors," Accounting Horizons, supplement, 2003, pp.17€“35)

Transcribed Image Text:

Current-Period Income Effect of Four Earnings Management Approaches Approach Used Increase Decrease No Clear Effect Row Total 113 20 Expenses and Other Losses 133 86 12 41 Col Totai 272 269 114 67 65 515 23 Revenue and Other Gains Business Comb Other Approaches 4 159 20 84