Questions:

1. Define the phrase "earnings management." Under that conditions, if any, is earnings management acceptable? Do auditors' responsibilities include acitvely searching for instances of earninfs management by clints? Defend your answers.

2. Dell recorded the exclusivity payments as an offset or reduction to its operating expenses. What "management assertion" ded that treatment violate? what audit procedure or procedures might have resulted in the discovery of that accounting treatment?

3. During the time frame that Intel was making exclusivity payments to Dell, Dell's business model was being adversey affected by the increasingly competitive nature of the PC industry. What responsibility, if any, do auditors have to analyze a client's business model? Do auditors have a responsibility to track and analyze key developments in a cinent's industry? Defend your answers.

4. What ethical issues do exclusivity agreements such as that between Dell and Intel raise? Are there analogous ethical issues faced by audit firms and their clients. Explain.