Escolar Documentos
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Cultura Documentos
PGDM-Session 7
Unduly aggressive financial Targets Domination by person or group without controls Aggressive accounting practice to keep stock prices high Pressure to reduce tax liabilities Major performance related compensation Non-Financial personnel involved in
Duties of an Auditor
To give an accurate statement to the members about the state of affairs of a company To meet the objectives of the Companies Act 1985 and also the Articles of Association To be reasonably skillful and careful in identifying the true nature of the accounts
Ethical Audit
It measures the extent to which the activities of a business comply with the standards it has publicly declared to its external customers It measures business conduct against varied moral standards of the community.
Deception: act of misrepresenting relevant information Churning: Excessive or inappropriate trading for clients account by a broker who has control over the account with intent to generate commissions rather than to benefit client Unsuitability Unfairness in Markets
Insider Trading
Refers to trading on price sensitive information by company employees or individuals closely connected with the firm This information has not been disclosed to other market participants
Hostile Takeovers
Are those that elicit opposition from the boards or employees of Target company Reasons for opposition are as follows: Disagreements over price Protecting their own interests
Poison Pills
An anti-takeover device used by companys management to make takeover prohibitively expensive for the bidders Company under target changes AOA so that group of Shareholders have special rights to buy and sell preferred stock at highly favorable prices (At times below market price)
Poison pills are prohibited in Britain by takeover code because they prevent open competition between bidders for shares Use of poison pills are ethical if they are designed to protect the management from unwanted
Greenmail
It occurs where a potential takeover agent purchases stock in a company After the purchases have totaled five percent the agent must announce his intention to takeover the company, if that is the intent Stock prices go up in anticipation of takeover battle Management of target company sends greenmails to prevent a shareholder from taking over the company Takeover agent ends up selling the shares back to company at an increased or higher negotiated price
Target company may be forced to incur debts to raise funds to finance the buy back of shares at premium price
Golden Parachute
A company gives lucrative benefits to its top executives such as stock options, bonuses, etc Presence of parachute allows management to evaluate takeover bid more objectively
People Pill
Management threatens that in event of a takeover the entire management team will resign If managers act in their own interest rather than companys long term value then they are acting unethically
Management Buyout
It occurs when management decide to bid for the company They convert the company into a private company and at a later date, bring it back to market to make substantial profits.
Shareholder believe that management may resort to unethical practices to bring down share prices and buy out at cheaper rate Unethical activities can involve leaking confidential information by managers for their benefit during buy out
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