Suppose that a company is currently private (its shares do not trade on a public stock exchange)

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Suppose that a company is currently private (its shares do not trade on a public stock exchange) but it is considering going public (issuing shares on a public stock exchange). Discuss the incentives that the company might have to misstate its income statement via its revenue recognition policies. If a company decided to change its revenue recognition policy to enhance its earnings, would the investors realize what it was doing? Where would a new investor look for information about the changes?
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Financial Accounting A User Perspective

ISBN: 978-0470676608

6th Canadian Edition

Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry

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