Class 05 Flashcards
fraud
why are CEOs incentivized to boost their earnings?
boost sales + quotas + job security + shareholders + alleviate earnings during economic downturns (taking a back)
what are AAERS?
detailed releases on the nature of misconduct
what’s a con of the SEC?
selection bias towards large firms + failing firms due to limited resources
what’s a pro of the SEC?
high confidence they identify manipulating firms
what is the most common form of fraud?
revenue recognition + among tech companies since they can toy around with UR
what are street earnings?
non GAAP but argues to be more representative of a firm’s health + performance
T/F: EBITDA meets GAAP
false
why do companies do EBITDA?
argue it’s better reflective of company health
how is EBITDA used to manage earnings?
companies can boost NI by adding expenses
why do fraudulent firms meet/exceed analyst expectations?
it affects their stock
