disclose its contingent liabilities
Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Chapter2: The Auditor’s Responsibilities Regarding Fraud And Mechanisms To Address Fraud: Regulation And Corporate Governance
Section: Chapter Questions
Problem 8CYBK
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Question
The Boeing Company, manufacturer of jet aircraft, is the defendant in numerous lawsuits claiming unfair trade practices. Boeing has strong incentives not to disclose these contingent liabilities . However, financial accounting standards require that companies report their contingent liabilities.
Required:
a. Why would a company prefer not to disclose its contingent liabilities?
b. Describe how a bank could be harmed if a company seeking a loan did not disclose its contingent liabilities.
c. What is the ethical tightrope that each company must walk when it reports its contingent liabilities?
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