Misrepresentation of Financial Reports 4 pages

Corporation Transactions and Misrepresentation of Financial Reports

Business law also called commercial law is a branch of civil law that governs business as well as, commercial transactions, and deals with both the private and public law. The branch created to ensure that, they are no exploitation and manipulation of people as well as rules and regulation in order to benefit some members of a business. This means that should one break or manipulate the rules and regulation in his favor. The or she must face the court in accordance with the law. With legal rights of all investors considered as an important element of the business law, we examine the board changes within the filling of the shareholder derivative lawsuits and might not be frivolous. Also, lack of highly competent employees within a business can lead to tremendous losses and to some extent closure of the business in accordance with law, due to the loss incurred. This is due to unethical factors arising due to misrepresentation of financial position of the company.


Legal wise, protection of shareholders’ rights is considered as an important element of business law and governance (Shleifer & Vishny, 1997). Therefore, the law allows the shareholders to bring lawsuits against managers or directors, when they realize that managers have exploited or manipulated their position of control inappropriately. There are proper rules and regulations set aside to dealing with issues of lawsuits (Beck & Bhagat, 1997). Also, there is enough evidence of business or corporative governance changing in certain lawsuits (Jones & Weingram, 1996).

Financial misrepresentation is the failure to provide accurate and correct portrait of financial position of a company. This is against the business law (Jensens, 2004). Since all have different cultures with values and ethics, it is unethical for a company not to provide clear financial position, and this affect the company’s stakeholders.


A case where Modell owned 80% of Cleveland stadium, 53% of Cleveland Brown Football Company and Gries own 43% of Brown. Browns board consisted of Modell, the outside lawyer of both company, three individuals employed by both Corporation and Gries. Modell propose that Browns buys the stadium for $6 million and Gries objects saying that that stadium appraised for only $2 million. The Brown board approves the purchase by all directors other than Gries voting in favor. Gries commenced shareholders derivative suit seeking to rescind the purchase.

Modell won the case. This is because the corporate governance indicates that directors owe a fiduciary duty to their corporation as well as to the shareholders (Fletcher, 1965). However, the, a director does not owe a fiduciary duty the rest of shareholders of the terms of directors to the third party. Even in cases, where the director may be paid more per share than the rest of shareholders (Tyron, 1995).

As a director dealing with corporation, one must be fair enough, open as well as honest. This is because directors showing personal interest in the Corporation transaction is said to be dishonest and unfair. In a case, Modell do not show personal interest when proposing the purchase, despite owning 80% of the company. And even the other directors who vote in his favor do not have a personal interest too. This fact makes him win the case, since Modell discloses all the facts about the purchase taking no advantage of his position, dealing fairly and openly to show the benefits to the company.

The transaction was fair, open, and the corporation was willing to take the opportunity. This is evidence by the fact that majority voted in Modell favor, without personal interest. The court also had it is own ways to examine fairness, honesty and personal interest at large in order to rule the case.

A Fortune 500 CFO admits to having treated $4 billion in operating expenses as assets, hence showing profit instead of loss. The stock drops by 95% and bond covenant related to billion breached. Later they sold the stock for $15 million generating $10 gain and auditor never detected this. In this case, the Corporation might have to file for bankruptcy protection. This is because of the sudden loss of revenue which prevents the company from paying their suppliers and still has to pay employees wage, taxes as well as other bills.

Massive financial losses also result to debts which have to be cleared. This is due to misrepresentation or wrongdoings in the company as well as scandals which may cause the stock price to drop. Filing for bankruptcy makes the Corporation legally protected from their creditors, from trying to collect on debts.

Some provisions of the securities law will probably be the basis for a class-action lawsuit by the stockholders. In such a case, the plaintiff must establish the intention and the harmed by the misrepresentation. This may include; interference with contractual relation, prospective business advantage as well as unfair competition.

Interference with contractual relation allows the plaintiff to recover damages upon the claim. T5his involves a valid contract between plaintiff and the other party, the corporate knowledge of the contract, and the actual breach as well as resulting damages. There is also the issue of unfair and dishonesty which is unethical in accordance with the law.

The basis of the class-action lawsuit; includes the interference with the contractual matters, unfairness and dishonesty ways of running the business, as well as lack of total disclosure of the intended act to the stakeholders.

The 1995 Act probably cannot stop a class-action lawsuit from proceeding to the discovered phase. This is because the corporation has already broken the law and there is enough evidence. The corporation intentionally committed the crime and the fact that there was enough evidence, there was no way the 1995 act would prevent the proceedings.

The Corporation may be subjected to criminal securities sanction as well as civil. This is because the corporations have violated the rules as well as regulation, and ethics governing the corporation’s (Becker, 1968). Therefore, commits a corporate crime and Embezzlement which is an unlawful use of money as well as properties. By intentionally treating the $4 billion in operating expenses as asset, it is unlawful and unfair to the stakeholder who is not well aware of the situation (Jensens, 2004). Therefore, such a corporate must face the law to prevent exploitations in business.

The SCE are not likely to allow such corporate as CFO to be office or directors of a publicly traded Corporation in the future. This is because of its involvement in a business crime which was intentional and led t; a massive loss of the corporate, therefore; CFO is not competent professionally to hold or to direct publicly traded corporations (Zingales, 2004). This is also due to the fact the same crime may be repeated if given a chance, leading to mismanagement of public funds, and massive losses. Therefore, the Corporation is under antitrust law.

Also, the SEC will not allow the $10 million gain on the stock. This is because the money generated out of unlawful altering of the statement, resulting in losses. Therefore, the $10 should be used to overcome the loss incurred. Therefore, against the business law to put the $10 in stock, bearing in mind that they are intentional misrepresentation of the financial report to work in favor of the Corporation.

Different penalties could be imposed on the CFO as well as individuals (Becker, 1968). The Corporate can be ordered to pay fines and return any personal monetary, gained as a result of the illegal activity (Romano, 2004). The individuals can be prohibited from managing other corporations. Also, professionals such as accountant can be suspended from practicing. The Corporation can be charged against a civil court as well as the imprisonment of the managers.

Reference list

Arlen, J. (1994). The Potentially Perverse Effects of Corporate Criminal Liability, the Journal of Legal Studies 23 (June), 833.

Becker, G.S. (1968). “Crime and Punishment: An Economic Approach.” Journal of Political Economy 76 (March/April), 169-217.

Zingales, L. (2004). The Costs and Benefits of Financial Market Regulation, European Corporate Governance Institute working paper 21/2004

Get Professional Assignment Help Cheaply

Buy Custom Essay

Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?

Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.

Why Choose Our Academic Writing Service?

  • Plagiarism free papers
  • Timely delivery
  • Any deadline
  • Skilled, Experienced Native English Writers
  • Subject-relevant academic writer
  • Adherence to paper instructions
  • Ability to tackle bulk assignments
  • Reasonable prices
  • 24/7 Customer Support
  • Get superb grades consistently

Online Academic Help With Different Subjects


Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.


Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.

Computer science

Computer science is a tough subject. Fortunately, our computer science experts are up to the match. No need to stress and have sleepless nights. Our academic writers will tackle all your computer science assignments and deliver them on time. Let us handle all your python, java, ruby, JavaScript, php , C+ assignments!


While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.


Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.


In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.


Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.


We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!


We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.


Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.

What discipline/subjects do you deal in?

We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.

Are your writers competent enough to handle my paper?

Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.

What if I don’t like the paper?

There is a very low likelihood that you won’t like the paper.

Reasons being:

  • When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
  • We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.

In the event that you don’t like your paper:

  • The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
  • We will have a different writer write the paper from scratch.
  • Last resort, if the above does not work, we will refund your money.

Will the professor find out I didn’t write the paper myself?

Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.

What if the paper is plagiarized?

We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.

When will I get my paper?

You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.

Will anyone find out that I used your services?

We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.

How our Assignment  Help Service Works

1.      Place an order

You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.

2.      Pay for the order

Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.

3.      Track the progress

You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.

4.      Download the paper

The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.

smile and order essaysmile and order essay PLACE THIS ORDER OR A SIMILAR ORDER WITH US TODAY AND GET A PERFECT SCORE!!!

order custom essay paper