There is strong evidence that companies have used pension obligations as a means of smoothing earnings by changing the assumed long-term discount rate or the earnings rate,so this is an important and judgmental area in which the auditor must be careful to exercise appropriate professional skepticism.

Question

Quizplus · Accepted Answer

There have been several cases in which companies have manipulated their pension obligation assumptions to smooth their earnings. Therefore, it is crucial for auditors to exercise appropriate professional skepticism in this area.

There Is Strong Evidence That Companies Have Used Pension Obligations