[kmwgrace]

The Becker question is:

Accepting an engagement to compile a financial projection for a publicly held company most likely would be inappropriate if the projection were to be distributed to:

a. A bank with which the entity is negotiationg for a loan

b. A labor union with which the entity is negotiating a contract

c. The principal stockholder, to the exclusion of other stockholders

d. All stockholders of recors as of the report date.

The answer is d – but how does that not violate insider trading laws? I thought that internal information had to be distributed equally to all stockholders or to none at all?

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[thebusyone]

The principle is to restrict the use of financial projections because they're hypothetical scenarios and may confuse readers.

I don't think this situation relates to insider trading laws. You might be thinking about the prospectus that is distributed to every shareholder prior to purchase.

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[jeff]

Projections are limited use because they use hypothetical data (vs a forecast which uses historical data). The other three options would be limited use.

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Minimorty]

Pretty sure financial projections must be labeled as limited use or specific purpose or something like that (i forget the terminology). Basically, distributing to all of the shareholders is too broad of a use. The other three answers are for a specific and limited purposes.

[jeff]

Beat me to it 🙂

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[kmwgrace]

Okay, thanks. That helps. 🙂

~ Kate... MTX!
CPA exam on hold while I homeschool my 6 year old!

[Author]

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