Management may wish to overstate a company's income because bonus plans and stock options are related to reported earnings.

Question

Quizplus · Accepted Answer

Management may have an incentive to overstate a company's income in order to increase reported earnings, which in turn can lead to higher bonuses and stock options for themselves and other executives. This practice is unethical and can be illegal, as it misleads investors and creditors who rely on accurate financial statements to make decisions about investing in or lending to a company.

Management May Wish to Overstate a Company's Income Because Bonus