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Chapter 13. Where Were the Auditors? Cou... > Red Flag 4: Companies That Answer Cr...

Red Flag 4: Companies That Answer Criticism by Stressing Compliance with Accounting Rules

One of the most frequent responses of companies facing criticism over their financial statements is that there is no problem because “they are fully in compliance with Generally Accepted Accounting Principles [GAAP].” When you see this, don’t be lulled into a false sense of security—there are an increasing number of occasions when the SEC has taken action against companies for being deceptive in their accounting even though they are not breaching the United States accounting rules, often referred to as U.S. GAAP.


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