Background
Carart Ltd is company established by the smash repair industry in Australia. Smash repairers fix and repair cars after they have been involved in an accident. Most of the revenue of the smash repair business comes from a small number of insurance companies and car paint is their biggest cost. The industry is very fragmented, comprising many small businesses across Australia. Therefore, the individual smash repairer businesses had very little bargaining power either with the insurance companies or with their suppliers. In order to combat this, Carart Ltd was established and has the following aims;
REQUIRED
You are required to write a Letter of Advice to the Board, together with a transmittal email to Nicole outlining
1) The financial impact that declaring the rebate before or after 30 June will have (calculations are required)
2) Whether or not this represents earnings management, and if it is good or bad earnings management? (academic references required)
3) Your recommendation as to which year the rebate should be committed to pre or post 30 June. (Hint: you may want to consider the AAA model discussed in the lecture) (The Letter of advice should be limited to 4 pages plus references).
For further details see additional file:
Attachment:- Written-assessment-.rar