Chapter 1, Problem 3Q

What is the concept of conservatism in accounting and why is it important? Discuss the potential drawbacks of applying conservatism too strictly.

How does/can a financial intermediary reduce the risk facing them due to Adverse Selection?

considering the need to get to know the customer, how does the advisor present financial products fairly? And does a comparative of financial products always work? Can the behavioral component of the client  to purchase a financial product and the complexity of the financial product provide a hinderance to an ethical presentation?

What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical conflict?

Use your own word to explain heuristics  and In a business context,how would heuristics lead to poor decision making?

How does an investment advisor deal with a situation where he is convinced the client’s investment decisions fall outside his investment objectives and risk tolerance? What are the ethical issues?

Discuss the importance of ethical behavior in accounting and the consequences of unethical behavior.

The chapter encourages analysts to develop forecasts that are realistic, objective, and unbiased. Some firms managers tend to be optimistic. Some accounting principles tend to be conservative. Describe the different risks and incentives that managers, accountants, and analysts face. Explain how these different risks and incentives lead managers, accountants, and analysts to different biases when predicting uncertain outcomes.