Question

When looking for accounting or documentary symptoms of fraud when a merger occurs, one of the first steps should be to:

a) make sure that the purchasing company got a fair deal
b) make sure that the selling compnay properly disclosed its financial troubles
c) make sure both the buyer and the seller were content with the deal
d) make sure that the accounting methods used were appropriate and consistent with accounting standards

Answer 1

To detect potential fraud in a merger, it's critical to verify that appropriate and standard accounting methods were used to ensure accurate financial representations and compliance with regulations.

Step-by-step explanation:

When looking for accounting or documentary symptoms of fraud during a merger, one of the first steps should be to make sure that the accounting methods used were appropriate and consistent with accounting standards. This ensures that the financial statements and disclosures made by both the selling and purchasing companies are accurate and comply with regulatory requirements, reducing the likelihood of fraud or misrepresentation. Evaluating the accounting methods is essential for verifying that the economic substance of the merger is properly reflected in the financial records, which is fundamental for shareholders, regulators, and other stakeholders.