Explain a few situations where the Management or the Board of Directors are personally involved in the entity’s financial performance.

Management/Board of Director are personally involve when they : 

  • Have significant financial interests in the entity
  • Significant portions of their compensation like bonuses,stock options and earn-out arrangement begin contingent upon achieving aggressive target s for stock price, operating results, financial position, or cash flow
  • Personal guarantees of debts of the entity.

{ See article on Excessive pressures on Management and  article on aggressive accounting for revenue or aggressive revenue recognition }

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