Ethical Obligations and Decision-Making in Accounting 2nd Edition by Steven Mintz, Roselyn Morris

Exercise 19

In its decision, Justice Balmer writing for the Oregon State court stated that: “The critical issue is whether OSM’s market losses were a reasonably foreseeable result of the defendant’s wrongful conduct.” If we assume that Coopers genuinely believed its accounting for the $12.3 gain was correct under GAAP, is it reasonable to conclude, as did the Oregon State court, that Coopers’ should have foreseen the market decline in OSM’s stock price? What if Coopers knew that the accounting treatment was not in conformity with GAAP?

Step 1 of 2

GAAP:

GAAP stands for generally accepted accounting principles. It is the set of accounting principles and standards.

It was issued in 1973 for US public and private companies by the financial accounting standard board for issuing a public statement.

It is the set of accounting guidelines lines and rules used by the companies for financial reporting.

SEC:

SEC is the first federal regulator market created in 1934. It is an independent agency of the federal government.

SEC authority in the accounting regulatory environment:

1. It oversees the security market and responsible for protecting investors.

2. It set a standard of ethics for the best practice for accounting.

3. It takes action against the lawbreakers.

4. It monitors the takeover action in the US and protecting the investor from the manipulate practice and fraudulent.