Final answer:
The question deals with the importance of understanding the backgrounds, motivations, and decision-making influence of directors and management in preventing financial statement fraud. The role of the board of directors, auditing firms, and outside investors are critical in ensuring corporate governance, which failed in the case of Lehman Brothers.
Step-by-step explanation:
The question pertains to the investigation of financial statement fraud, where it is important to know about the backgrounds, motivations, and influence of directors and members of management within an organization. These three aspects are critical since they provide insights into how the governance of an organization is executed and could potentially alter the financial reporting of the company.
The board of directors, elected by shareholders, plays a pivotal role in corporate governance by overseeing top executives. Despite being a key institution, directors may be influenced by top executives who have a significant say in nominating board candidates. Consequently, the robustness of corporate governance can sometimes be compromised, as illustrated by the failure of Lehman Brothers to provide accurate financial information to its investors. Such failures highlight the importance of effective monitoring by both internal and external parties, including auditing firms and outside investors.
In cases where the corporate governance system does not function properly, it can lead to financial statement manipulation, thus harming shareholders and other stakeholders who rely on accurate financial reporting.