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REQUIRED a. Is it an example of fraudulent financial reporting? b. What procedures could reduce the occurrence of such "mistakes"?

REQUIRED a. Is it an example of fraudulent financial reporting? b. What procedures could reduce the occurrence of such "mistakes"?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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5.6. An insurance company in Asia reported profit of $100 million for the financial year through the news-dissemination system of the stock exchange. Its stock price increased several times, as the announced profit was 10 times more than the previous year's. A few days later, the company announced a mistake in the released financial results, and stated that the correct profit should be $9.5 million. Regulatory bodies were asked to investigate if it was a trick used to manipulate stock prices. It was not clear who should be held responsible: the management, the accounting system or the auditor? REQUIRED a. Is it an example of fraudulent financial reporting? b. What procedures could reduce the occurrence of such "mistakes"?
Transcribed Image Text:5.6. An insurance company in Asia reported profit of $100 million for the financial year through the news-dissemination system of the stock exchange. Its stock price increased several times, as the announced profit was 10 times more than the previous year's. A few days later, the company announced a mistake in the released financial results, and stated that the correct profit should be $9.5 million. Regulatory bodies were asked to investigate if it was a trick used to manipulate stock prices. It was not clear who should be held responsible: the management, the accounting system or the auditor? REQUIRED a. Is it an example of fraudulent financial reporting? b. What procedures could reduce the occurrence of such "mistakes"?
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