Question

The potential sources of noise and bias in accounting data are: Group of answer choices Rigidity in accounting rules Random forecast errors Systematic reporting choices made by corporate manager to achieve specific objectives All of the above None of the above

Answer 1

Answer: All of the above

Explanation:

Accounting data can have bias or data that should not necessarily be included due to a couple of factors.

Accounting rules are too rigid because when they are applied, the Accountants will ibe unable to remove the noise and entries made by Management without removing a substantial part of Accounting records. There is need for more flexible rules so that Accountants can restrict how easily Management can introduce bias.

Accounting works a lot of forecasted information and it is impossible to make completely accurate forecasts as events can simply happen out of nowhere and disrupt operations. Also there is Human error in the forecasts so this can lead to noise and bias.

Finally, Accounting bias and noise can be linked to pressure from Corporate management to report data in a certain way for a myriad of reasons such as to improve management benefits if they are performance related, to avoid taxes, and to avoid Government regulations amongst others.