Research and Development Division of Molina Corporation

Ethics in financial reporting is critical to the reliability of financial statements. Corporate managers are under enormous pressure to provide high earnings and dividend amounts. After reading the EC 14 Ethics Case on page 14-35 in your text (attached), discuss the following:

Who are the stakeholders in this situation?

Is there anything unethical about Lowery’s intentions or actions? Explain your answer.

What is the effect of a stock dividend on a corporation’s stockholders’ equity accounts? Which would you rather receive as a stockholder — a cash dividend or a stock dividend? Why?