CHAPTER FIVE
Scrutinize the Financial Statements
SO MUCH GOES ON within an organization at the operational level that it can be difficult to grasp its business reality just by reading board packets and listening to briefings from management. In this chapter, we focus on the common types of financial misstatements as well as on suggested governance protocols, discussing how directors can familiarize themselves with idiosyncratic back-office operations, including techniques to identify complex transactions that are more form than substance.
Types of Financial Misstatements
Headline-grabbing accounting scandals like Enron, which eroded shareholder value from $90 a share in August 2000 to less than a dollar in November 2001, illustrate the damaging ...
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