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QUESTION EIGHT ( 8 marks) Scooters Ltd manufacturers, produces and sells Scooters. Its manufacturing process has a significant amount of fixed costs. For the year
QUESTION EIGHT ( 8 marks) Scooters Ltd manufacturers, produces and sells Scooters. Its manufacturing process has a significant amount of fixed costs. For the year ended 30 June 2022, analysts forecast earnings per share of $14.50. When Scooters Lid announced earnings on 25 August 2022 they reported earnings per share of $14.51. Below is an extract of some account balances: 2022 2021 $ $ Sales 4,500,000 4,900,000 COGS 2,900,000 3,100,000 Cash at Bank 175,000 120,000 Accounts Receivable 800,000 400,000 Inventory 270,000 180,000 Accounts Payable 230,000 250,000 Required Assess if there is any incentive for earnings management. Provide and justify some quantitative evidence "red flags" that may indicate earnings management. Provide an assessment of the quality of the evidence due to alternative explanations
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