Refer to Theory in Practice11. 1 in Section11. 6. Required a. Which earnings management policy did Nortel
Question:
Refer to Theory in Practice11.
1 in Section11.
6.
Required
a. Which earnings management policy did Nortel appear to be using in 2001 and 2002?
Why? Which policy did it appear to be using in 2003? Why?
b. Discuss the possible impacts on manager effort of the Nortel compensation plan’s tying of bonuses to a return to profitability.
c. Assuming that the accruals recorded by Nortel in 2001 and 2002 were justified by pessimistic economic conditions at the time, where did Nortel management go wrong?
Explain.
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