Although the financial statements of all companies are potentially subject to manipulation, the risk is greater for companies that

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Companies that have to make significant judgments for accounting estimates (such as those related to revenue recognition, allowances for bad debts, or impairments of assets) have more opportunities to manipulate their financial statements. This is because accounting estimates often involve subjective factors and assumptions, which can be manipulated by management to achieve a desired outcome. Companies that are heavily regulated may face more scrutiny and oversight, which can help mitigate the risk of financial statement manipulation. The level of debt and the economic environment may also affect a company's risk of financial statement manipulation, but these factors are not as directly related to the degree of judgment required for accounting estimates.

Although the Financial Statements of All Companies Are Potentially Subject