Financial statements are the accounting reports that present past performance information as a snapshot of the...

Financial statements are the accounting reports that present past performance information as a snapshot of the firm's assets periodically usually quarterly and annually. Stockholders analyze the financial statement to know the firms' profitability and its ability to make dividend payments in the future. Why is the manipulation of financial statements not only unethical and illegal, but also bad for stockholders?

Expert Solution

Financial statement are formal record of financial activities and financial position of the organisation. Manipulation of financial statements is an intentional mispresentation of financial statements. Intentional mispresentation is an fraud that damage the wealth of stakeholders.

As per the ethical standards and legal provisions manipulation of financial statements is not allowed, (like a criminal activity), as per the auditing standards manipulation of books of accounts leads to adverse reporting to the stock holders. The manipulation of financial statements are not only unethical but also illegal, punishable offence.

Showing huge profits to actract stockholders, window dressing of financial statements and missutilisation of stockholders wealth and company's resource will cause for liquidation. Such time shareholders will not get their investment, employee loss their position in Company, This effect (bad for) not only stockholders and also employee....etc.,

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jeff jeffy answered 1 year ago

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