Question: You are approached by the management of a small start up
You are approached by the management of a small start-up company that is planning to go public. The founders are unsure about how aggressive they should be in their accounting decisions as they come to the market. John Smith, the CEO, asserts: “We might as well take full advantage of any discretion offered by accounting rules, since the market will be expecting us to do so.” What are the pros and cons of this strategy? As the partner of a major audit firm, what type of analysis would you perform before deciding to take on a new start-up that is planning to go public?
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