An inherent risk related to asset impairment is that management normally does not have incentives to write down asset values.

Question

Quizplus · Accepted Answer

This statement is true. Writing down asset values can lower reported profits and may negatively impact bonus payments or stock prices, so management may be reluctant to do so. However, not recognizing such impairments can mislead investors and creditors by overstating the value of assets on the balance sheet.

An Inherent Risk Related to Asset Impairment Is That Management