Question

As a result of the recent mortgage crisis, many banks reported record losses to their mortgage receivables and other assets based on the decline in these assets’ fair values.

Requirements

1. What would the effect be to stakeholders if such losses were not reported in a timely way?
2. If a business chooses not to report these losses, is there an ethical issue involved? Who is hurt?

Answer 1

Answer:

Ethical or Moral issue :

Requirement - 1

• Consequence of not announcing the issues .
• Coming up next are the impacts to the partners if the misfortunes are not announced by banks.
• The Balance sheet of the organization will show the assets exaggerated.
• The income statement will exaggerate the organization's net income.
• At the point when the financial statements exaggerate the financial situation of the company ,it misleads the investors creditors   and the partners .Finally this will settle on them take an wrong decision.

Requirement - 2

Moral issue included :

• The administration is capable to plan and report a reasonable fiscal report .Managers ought to adhere to moral standards, for example, respectability ,competence and honesty .He is considered responsible for the  stake holders, customers ,government workers and others.
• At the point when the statements are distorted or misrepresented it deceives the clients or customers who rely on those to take timely decisions. It likewise hinders the organization's reputation.

In this way the managers must pursue the below referenced activities to report a reasonable and fair fiscal statement.

• Present reasonable,accurate or correct and time bound information.
• Appropriate disclosure of all information that encourages the client or customer to comprehend the report.
• Abstain from doing activities that will make the obligations or duties unethical .