Fully answer the following questions:.

Earnings management may occur through manipulation of estimates and GAAP policy application (distortion) and/or through manipulation real earnings activities (yearend activities at cut-off).

a. Explain each of these evaluating their economic impact.

b. What implications are there with regards to the efficacy of GAAP in limiting the opportunity for earnings management?

c. Examine the role that a companys Audit Committee and Compensation Committee should play in curtailing such activities.