A client whose goal is to maximize reported net income might intentionally

Expert Solution

A client whose goal is to maximize reported net income might intentionally involve in material misstatement. Material misstatement are such financial statements in which intentionally changes are done so that their outcome can be altered.

Now to increase reported net income he will show increased sales in such statements.
To increase the gross profit he might also increased closing stock value.
Further, the gross profit are converted into net profit after deduction of various expenses.
He might show decreased expenses in profit and loss statements which will increase the net profits.
Decreased depreciation expenses can also be shown in profit and loss statement to maximize reported net income.

ekkarill92 answered 2 years ago

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