Question: The financial statements are the representation of management.
Professor's Note: Start by reviewing What Is Audit? Feel free to review the background material or Internet for additional resources.
1. How can investors and other third parties trust this information and why is trust so important?
A third financial statement, the statement of cash flows is also important.
Professor's Note: The following videos provide a starting point. Feel free to review the background material or Internet for additional resources.
Video: What is cash flow? (By TheSkeebie21)
- What is a cash flow statement? (By Wall Street Survivor)
2. How is the cash flow statement different from the income statement and what is its purpose?
The Enron collapse exemplifies greed, fraud, and misuse of accounting rules. The demise of Enron had a devastating effect on many people's lives.
Professor's Note: The Enron Scandal Explained in One Minute: Corporate Recklessness, Lies and Bankruptcy is a good starting point for your reflections.
3. What were the effects on accounting, the profession, ethical standards of business conduct in general, employees, supporting businesses and/or government regulation? How can we minimize the risk of future financial scandals and maintain public trust in the system?