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When is earnings management legal and when is it fraud

When is earnings management legal and when is it fraud

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Ans- Company managers can “manage earnings” subjectively by timing business activities or the reporting of those activities.

Some researchers believe it is a legal act and totally different from fraud because it is within the boundaries of GAAP.

And some Earnings management becomes fraud when companies intentionally provide materially misstated information. It view as an unethical act that needs to be fought by external auditors.

Thanks and please upvoted!!

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