Question

Which of the following statements is CORRECT? Group of answer choices There are many types of unethical business behavior. One example is where executives provide information that they know is incorrect to outsiders. It is illegal to provide such information to federally regulated banks, but it is not illegal to provide it to stockholders because they are the owners of the firm. Ethics is not an important consideration in business and in business schools. Ethical behavior is not influenced by training and auditing procedures. People are either ethical or they are not, and this is what determines ethical behavior in business. If someone deliberately understates costs and thereby causes reported profits to increase, this can cause the stock price to rise above its intrinsic value. The stock will probably fall in the future. Both those who participated in the fraud and the firm itself can be prosecuted. If a lower level person in a firm does something illegal, like "cooking the books," to understate costs and thereby artificially increase profits because he or she was ordered to do so by a superior, the lower level person cannot be prosecuted but the superior can be prosecuted.

Answer 1

Answer:

If someone deliberately understates costs and thereby causes reported profits to increase, this can cause the stock price to rise above its intrinsic value. The stock will probably fall in the future. Both those who participated in the fraud and the firm itself can be prosecuted.

Explanation:

When a companie's profits are overstated this gives investors the confidence to buy more shares demand increases and so does price.

When the fraud is discovered shareholders will lose confidence in the firm and stock prices will fall.

When a fraud occurs those involved will be prosecuted. The firm will also be prosecuted for negligence because if internal controls were properly put in place, the fraud would have been detected.