Executives often prefer taking "real actions" as opposed to "accounting actions" to hit earnings targets because auditors cannot as readily challenge real economic actions.

Question

Quizplus · Accepted Answer

This statement is true. Real economic actions, such as increasing sales or reducing expenses, are more difficult for auditors to challenge than accounting actions, such as adjusting reserves or deferring expenses. Executives may be tempted to take real actions to hit earnings targets because they believe they are less likely to be caught by auditors or regulators.

Executives Often Prefer Taking "Real Actions" as Opposed to "Accounting