Which of the following observations concerning backdating of options is true?
A)It will not result in restatement of financial statements.
B)The extraordinary timing and frequency of occurrences defied statistical probability.
C)There is no concrete evidence that managers gained because of this practice.
D)It is a legal way of compensating managers who perform exceedingly well.

Question

Quizplus · Accepted Answer

The extraordinary timing and frequency of occurrences defied statistical probability. Backdating of options often occurred on dates that had unusually low stock prices, which is statistically unlikely to happen so frequently by chance. This suggests that managers were intentionally picking favorable dates to increase the value of their options.

Which of the Following Observations Concerning Backdating of Options Is