solution

In April, 2001, the management of U.S. Aggregates, Inc., a producer of aggregates made of a combination of crushed stone, sand, and gravel, announced that the company would be restating its earnings for the first three quarters of 2000. After the announcement, the company’s stock price per share dropped more than 75% from its high for the period affected by the company’s restatement of earnings. Financial irregularities of other companies have been announced in recent years. In late May, 2001, trading of the stock of U.S. Wireless Corporation was halted on the Nasdaq Stock Exchange when its share price dropped significantly. This sudden drop occurred when the company announced irregularities had been uncovered and it had replaced its chairman and chief executive. The price went from a high of 24.50 in March, 2000 to a low of 2.91.

Required
A. Did these companies practice full and fair disclosure? Why did the stock price of U.S. Aggregates and U.S. Wireless Corporation fall when investors learned that the company had produced financial information that was incorrect?
B. Do you believe “financial shenanigans” by management is an ethical issue? Explain