When executive compensation is based on the organization's financial results, which of the following situations is most likely to arise?
When executive compensation is based on the organization's financial results, which of the following situations is most likely to arise?
When executive compensation is directly tied to the organization's financial results, it can create pressure to meet financial targets. This pressure can lead to manipulation of financial data, such as reporting inappropriate estimates and accruals, to present a more favorable financial condition of the organization. Therefore, the most likely situation to arise is the organization reporting inappropriate estimates and accruals due to poor accounting controls.
Could someone give insight on this?