Which earnings management tool did WorldCom use?
A) Transactional earnings management
B) Materiality
C) Reserves
D) Both a and c
E) Both a and b
F) a, b, and c

Question

Which earnings management tool did WorldCom use? 
A) Transactional earnings management
B) Materiality
C) Reserves
D) Both a and c
E) Both a and b
F) a, b, and c

Quizplus · Accepted Answer

WorldCom used transactional earnings management and reserves as part of their earnings management strategy. They manipulated their accounting records by improperly classifying operating expenses as capital expenses, thereby inflating their assets and profitability. This involved the use of reserves to smooth earnings, a common practice in earnings management.

Which Earnings Management Tool Did WorldCom Use