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Question 4 The CEO of your company recently attended a seminar on financial analysis during which a session was devoted to corporate reporting. However, she
Question 4 The CEO of your company recently attended a seminar on financial analysis during which a session was devoted to corporate reporting. However, she did not benefit much from that session as she, with a marketing background, did not understand the many jargons employed during the session. She was particularly puzzled by the jargon "earnings management which was mentioned time and again during the session. In fact, she found the session very confusing as there were also other jargons which seemed to be very similar to each other, though not mentioned as frequently, like creative accounting, window dressing, income smoothing, off-balance sheet finance ... Lastly, after hearing so many deceptive devices employed by company management to pol the users, she wondered why did the police and other authorities NOT take any actions. Required: Write a brief memo to your CEO explaining the five jargons that have been included in quotation marks in the above paragraph. Provide one example for each of these terms on how they are implemented in practice and explain why these malpractices are possible in the current regulatory environment. (20 marks)
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