Question $2$

A number of research studies have documented evidence of earnings management by firms.

Required

a$)$ Name and explain any three forms of earnings management, and provide some possible motivations for management to engage in such forms of earnings management $($reference your answer$).$

b$)$ Explain and illustrate the relationship between changes in cash flow from operations and accruals for firms that use accruals to report a smooth income stream. Discuss whether the relationship is positive or negative, and whether the quality of reported accruals will be high quality or low quality $($reference your answer$).$

c$)$ Identify two positive and two negative effects of earnings management. Also discuss the role for financial reporting in minimizing possible ill effects of earnings management $($reference your answer$)$