What? Another Accounting Scandal? (2)
by MaestriUnfortunately, there have been so many accounting and corporate scandals that to do the topic justice would require a multivolume work; after this chapter I shall restrict most of the analysis to those accounting scandals dealing with the underreporting of corporate liabilities. These scandals include Enron, Global Crossing, Adelphia, and WorldCom, so I certainly take account of the important scandals of this time period.
While I start with an overview of the many accounting and auditing failures in corporate America, I focus on financial risk. As clarified later in this chapter and in the next, financial risk concerns the bad stuff that can happen to a company when it takes on too much debt. Investors and creditors recognize this concept, so they monitor how much debt exists in the financial structure of a corporation. But managers realize that investors and creditors are monitoring their firms, so sometimes they attempt to mask the quantity of debt they possess, sometimes even by lying about it. In this book I attempt to raise the awareness of the business community about this issue because such deception is hurtful to all.
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