Suppose that a company is currently private (its shares do not trade on a public stock exchange)
Question:
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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If a company is thinking of going public it might have an ince...View the full answer
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