Problem:
The board has collectively signed off on the last set of financial statements for the corporation, despite some concerns by in-house and external accountants about the accuracy of some of the data. After all, it is time for many of the management staff and a few of the board members to receive stock options from the company. Many of the members of the board and several members of the management team have insisted that the options were past due and that their issuance date should coincide with a period of time 6 months earlier when the price of the stock was 50% of its current value.
The accuracy of financial data in company reports has become an area of growing activity and litigation. The Sarbanes-Oxley Act was created to ensure the accuracy of corporate financial reports. Your task is to do the following:
Explain to the board about the legal liability it incurs when financial statements are incorrect (under SEC regulations).
Examine both the criminal and civil liabilities to individual board members whose signature are or might appear on the financial statement.