You are a senior manager at Giganto Inc. All senior managers and the board of directors are scheduled to meet next week to discuss some questionable manipulations of earnings that were found by the outside independent auditors. The CEO has asked you to be prepared to start the discussion by developing questions that should be addressed before responding to the auditors.
a. Why would the CEO be concerned about earnings management? After all, it is the auditor who attests to the fair presentation of financial reporting.
b. If the earnings management were deemed to be “abusive” and you decided to resign and blow the whistle, would you have any protection? Explain.