The Impact of Accounting Scandals of 2001 and 2002 Was

question 25

Multiple Choice

The impact of accounting scandals of 2001 and 2002 was especially important because

• A)it increased investor uncertainty about corporate fundamentals.
• B)the accounting industry had so many employees.
• C)the major accounting companies both consult and audit their clients, leading to a conflict of interest.
• D)it increased investor uncertainty about corporate fundamentals and the major accounting companies both consult and audit their clients, leading to a conflict of interest.

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Definitions:

Stockholders' Equity

Stockholders' Equity is the residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest in a company.

Net Income

The total earnings or profit of a company after deducting all expenses, taxes, and losses from the total revenue.

Retained Earnings

The portion of net income that is retained by the company rather than distributed to its shareholders as dividends.

Cash Dividend

A payment made by a corporation to its shareholders, usually as a distribution of profits in the form of cash.