What effect does income smoothing have on risk analysis?
A)Reduces the business risk of a company
B)Increases the financial risk of a company
C)Reduces the audit risk of a company
D)Has no effect on risk analysis

Question

Quizplus · Accepted Answer

Income smoothing reduces the perceived volatility of a company's earnings, which can make the business appear less risky to investors and analysts, thereby reducing the business risk.

What Effect Does Income Smoothing Have on Risk Analysis