Ethical conduct
In February 2006, former senator Warren Rudman of New Hampshire completed a 17-month investigation of an $11 billion accounting scandal at Fannie Mac (a major enterprise involved in home-mortgage financing). The Rudman investigation concluded that Fannie Mae’s CFO and controller used an accounting gimmick to manipulate financial statements in order to meet earning-per-share (EPS) targets. Meeting the EPS targets triggered bonus payments for the executives.
Required
Comment on the provisions of SOX that pertain to intentional misrepresentation and describe the maximum penalty that the CFO could face.
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