Corporate management could misstate operating activities and external users would be unable to readily discern the fraud. Hill et al. (2003) suggest cash ow from

‘Corporate management could misstate operating activities and external users would be unable to readily discern the fraud. Hill et al. (2003) suggest cash flow from operations is the hardest component of the statement of cash flows to understand yet it is one of the most used figures in determining available cash in the future.’ Hill, R., Benston, G.J. and Hartgraves, A. (2003), “Measuring corporate performance: the perils of turning to cash flow”, Public Utilities Fortnightly, Vol. 141 No. 10, pp. 20-22. Required:-

Discuss the common steps used to operating income components of discontinued operations and demonstrates the utilization of cash flow associated with debt and equity investments. (3 marks)

b). Critically evaluate how to use adjusted operating cash flow to uncover earnings that have been misreported using aggressive or fraudulent accounting practices (2 marks)