Reference no: EM132620135

Problem 1: If senior managers within a company were rewarded by way of accounting-based bonus plans then would they, or the owners/shareholders (or both), prefer the use of conservative accounting methods? Explain the reasoning for your answer.

Problem 2: In the article entitled "Earnings management through real activities manipulation" Roychowdhury considers three specific manipulation methods. Briefly explain why these three methods are reasonable choices for management to consider.