20. During the course of serving on an audit engagement team, you discovered that your...
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Accounting
20. During the course of serving on an audit engagement team, you discovered that your client last year recorded the receipt of cash as a sale rather than as a loan. As a result, the companys revenues and profits were overstated. You expect the company to eventually issue a prior-year accounting restatement and expect its stock price to fall.
Buying a put option essentially is a bet that a stock will fall in value. Would it be appropri- ate for you to buy a put option on this clients stock from an outside option seller before the clients forthcoming accounting restatement is announced publicly?
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