A key principle of financial reporting is that “information should be expressed so that substance, not form, governs” . What this means is that “the financial statements and accompanying disclosures of a business should reflect the underlying realities of business transactions. Conversely, the information appearing in the financial statements should not merely comply with the legal form in which they appear” . Managers, accountants, and auditors, who are supposed to be concerned with the long-term viability (going concern) of an entity have to be especially concerned with this principle. Auditors appear to be greatly influenced by litigation risk, the fear … Read more
The Great Recession of 2008 had a devastating effect on the world economy. Millions of jobs were lost, trillions in financial assets evaporated, and millions of people lost their homes. Great companies such as Lehman Brothers went bankrupt and many others needed to be bailed out by the government. One would think that an important lesson learned from the carnage is that greed is not good: Our firms need to be headed by trustworthy, upright leaders.
The reality is that the corporate world, led by greedy and self-absorbed CEOs, was heading down a treacherous path for more than 30 years. … Read more