Case 2 – Disclosure Strategy

Read the Disclosure Strategy case (see attached) and respond to the following questions:

1. Why do corporations provide quarterly earnings announcements and host earnings conference calls, if not required to do so by the U.S. Securities & Exchange Commission (SEC)?

2. Describe the practice of selective disclosure and how it could be used to potentially mislead investors and other users of financial information.

3. Assess CEO Trey Prescott’s selective disclosure plan for LEXM Corporation’s third-quarter earnings release. Identify the benefits and risks of implementing this disclosure plan. Do the benefits outweigh the risks?

4. The IMA Statement of Ethical Professional Practices’ overarching ethical principles are honesty, fairness, objectivity, and responsibility. Nick is a CMA® (Certified Management Accountant) and a member of IMA, and he is required to abide by these ethical principles. If Nick decides to support and implement the CEO’s proposed selective disclosure strategy, how might he be violating each of the ethical principles?

5. How can CFO Nick Alexander resolve the ethical conflict in this case, when the individuals involved are held to different sets of ethical standards?

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