Class Notes (836,365)
Canada (509,756)
Brock University (12,091)
Ethics (34)
ETHC 3P82 (34)
Lecture

8_March 10.doc

3 Pages
71 Views
Unlock Document

Department
Ethics
Course
ETHC 3P82
Professor
Thomas Mulligan
Semester
Winter

Description
Wednesday, March 10 - Financial Information, Insider Trading, and Truthfulness Truth: Correspondency (of a belief, statement, etc.) to reality; conformity to an actual fact; affects the field of accountancy LIES, DAMNED LIES, AND MANAGED EARNINGS by Carol J. Loomis (p. 154) Almost a position paper: Has no fully articulated thesis PROBLEM: "Cooking the books" (falsifying accounting records) to make business performance appear smooth over time p. 154: “Someplace right now, [...] an employee – probably high up and probably helped by prople who work for him – is perpetrating an accounting fraud.”  provocative start, journalistic style p. 154: “fundamental reason, very often, will be that the company or one of its divisions was ‘managing earnings’ [...] to make business look smooth and predictable when in reality it is not” p. 155: It is not ‘managing earnings’ – it is a criminal act namely accounting fraud p. 156: “Fundamental problem with this earning-management culture”  investors’ right to know p. 160: is often started by those on top and then everyone else gets dragged into it WHY: to attract investors, to protect stock price, to protect executive bonuses (often tied to consistent performance) p. 156: Stock price should be consistent over time; CEO is strongly concerned with it as his compensation depends on it HOW: overstate or understate revenues or expenses by: p. 157 • booking sales or expenses to wrong time period • exaggerated restructuring charges ("big bath"): artificially creating higher profits • (hidden) "cookie jar" reserves: not detectable by investors, makes it difficult to value a company • abuse of "materiality" (especially by auditors) • revenue recognition: wrongful booking of sales EXAMPLE: Canadian Livent case p. 156: Livent Corp produced theatrical performances and shows (Phantom ofthe Opera, Ragtime); founded by Drabinsky and Gottlieb in 1990; in 1998 Ovitz invested in company and afterwards looked into the books – discovered irregularities; company went bankrupt; 1999-2002: Drabinsky and Gottlieb get indicted and charged and sentence for prison in 2009 PARTIAL SOLUTION (is a journalistic paper): Respect for honest accounting practices and regulations WHY: because investors (and other stakeholders) should know the whole truth WHAT IS REALLY UNETHICAL ABOUT INSIDER TRADING? by Jennifer Moore (p. 176) p. 176: Definition ‘An insider trader is someone who trades in material, nonpublic information – not necessarily a corporate insider’; buys stock
More Less

Related notes for ETHC 3P82

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit