Question A3

Management may choose conservative or aggressive accounting approaches when reporting the financial performance and financial position. Answer parts a) to d) in point form.

1. Accounting choices do not violate the standards; however, involve managerial judgements, affecting reporting quality. Managers who manipulate financial information leave evidence. Commonly, the evidence relates to manipulation of revenue and expenditure recognition. Analysts should be able to pick the evidence and warning signs of information manipulation in financial reports. As an analyst, if you are sceptical about the reported revenue figure, what should be your approach to find any evidence of manipulation? (max words 250). (0.5*4=2 marks)