Which of the following is least likely to prevent earnings manipulation?

High Plains’ average net operating assets at the end of 2008 and 2007 was $977.89 million and $642.83 million, respectively.

Which of the following is least likely to prevent earnings manipulation?
A . The independent audit.
B . SEC certification filed by High Plains’ CEO and CF
D . High Plains’ bond covenants.

View Answer

Answer: C

Explanation:

Bond covenants can create an incentive to engage in earnings manipulation. If High Plains remains non­compliant, the bondholders can demand immediate repayment of the debt. (Study Session 7, LOS 25.c)