Article ReviewI agree with the statement that the author makes. This is because the flexibility that GAAP allows may present a moral hazard for managers to engage in earnings management in an effort to present results that show a favorable position of the entity. A study by McVay presents an example of imprudent practices that GAAP may allow. In the study, McVay argues that managers may misclassify items in the income statement thus leading to the presentation of a performance that is more favorable than the entitys actual performance. Such misclassification arises from the discretion that managers are allowed to classify expenses. A second type of earnings management also cited by McVay (2006) and McEnroe (2010) is using their discretionary judgment allowed in GAAP to manipulate real activities. An example of these activities would be to reduce the expenditures on R&D, leading to an increase in the reported income. Such instances indicate that GAAP may make it possible for managers to provide misleading financial statements and thus it fails to offer assurances to the users of financial statements that the statements are a true reflection of the entitys state of affairs.McEnroes opinion that GAAP does not offer assurances to the accuracy of the financial statements is fair even to managers who simply want to follow GAAP. This is because such managers, when not inclined to inflate the performance of the entity, will still adopt a conservative approach under GAAP. By recognizing the weaknesses in GAAP and adopting corrective action, the resultant accountability will safeguard the reputation of the accounting profession. As such, even the managers who are honest in their use of GAAP will benefit from increase in users trust of the statements that the accounting officers prepare.McEnroes observation that auditors are unlikely to use an audit opinion to police bad business practices even if they involve earnings management (2010, p. 65) can be explained by auditors fear of losing business when they offer qualified opinions. A study by Stefanik et al. (2009) for instance found out that clients are likely to switch auditors when the auditors offer a qualified opinion (as cited in Habib, 2013, p. 185). As such, since auditors can still find recourse by arguing that the statements were prepared in accordance with accounting principles espoused by the GAAP, they may be hesitant to provide an opinion that could injure their relationship with the client.I, however, do not agree with the auditors position. This is because by disregarding bad accounting practices, auditors would be escaping from their moral duty to encourage fair reporting by the clients. When auditors offer an unqualified opinion for reports that are subsequently found to be misleading, they stand a risk of damaging their reputation and thus losing the business they were initially trying to preserve (Habib, 2013). Additionally, by assuming their moral duty to offer a statement that indicates the extent to which the financial statements are a representation of the entitys state of affairs, both the auditors and the clients would benefit in the long term. For example, DeFond, Lim and Zang (2012) observe that when auditors encourage clients to be conservative in activities that involve managers discretion, benefits such as lower incidences of accounting restatements, lower audit fees, fewer opinions concerning the going concern status of the entity, and less likelihood for the auditor to resign accrue. Thus, my opinion is that auditors should offer qualified opinions where they encounter imprudent practices to manage earnings during their audits.ReferencesDeFond, M. L., Lim, C. Y., & Zang, Y. (2012). Retrieved from Habib, A. (2013). A meta-analysis of the determinants of modified audit opinion decisions (3), 184-216. Doi:10.1108/02686901311304349McEnroe, J. E. (2010). Public accountants perceptions of the acceptability of earnings management practices through the employment of GAAP in the post-Sox period. (1), 59-72.McVay, S. E. (2006). Earnings management using classification shifting: an examination of core earnings and special items. (3), 501-531.