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The ethics of financial statement preparation

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1. Management can take an over - or under - representation approach to financial statement preparation. Debate the reasons for these types of misrepresentations.

2. While conducting your auditing duties, you discovered significant fraud. Determine how you would let management know these facts.

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The solution discusses the ethics of financial statement preparation.

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1. Misrepresentation of financial statements is not only unethical but it is also a federal crime. Companies that provide false financial statements can land their Chief Executive officer in prison for many years. Enron, Tyco, and WorldCom are good examples of companies that manipulated their financial statements in the past. Their executives are therefore serving terms behind bars. The Sarbanes-Oxley Act of 2002 was enacted to provide guidelines on financial reporting. It is required by U.S. laws that companies follow those guidelines when preparing ...

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Edwin Sinclar, MBA
Education
  • MBA, Aspen University
  • Bachelor of Science , Berea College
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