CFA Practice Question

CFA Practice Question

Marvin Petersen has been asked by his manager, Molly Draper, to update his report on Beltway Furniture Industries and call the CFO for an interview and clarifications on sales projections. Beltway's stock has been flat. It uses Marvin's firm for investment banking activities. Marvin is aware that a new stock issue is in the works for this client. Marvin receives several sales forecasts with different probabilities from the CFO and revises his report accordingly. When Molly sees the report she calls him to her office and asks him to base his projections on the most optimistic sales forecast, as this would help sell the new stock issue in the market.
A. Marvin should revise the report according to Molly's wishes, or resign from his position, as he is being asked to compromise his independence.
B. If Marvin revises the report he violates Standard V (A) - Diligence and Reasonable Basis.
C. Marvin should revise the report but note in a footnote that the sales are based on the most optimistic projections. He need not discuss the expected or average sales of the company.
Explanation: The report should be independent and objective and should not mislead the reader. Marvin should refuse to alter the report but he may mention the most optimistic sales projection in a proper context along with the most pessimistic projection of the sales to present a balanced view. Otherwise he will violate Standard V (A) - Diligence and Reasonable Basis.

User Contributed Comments 2

User Comment
pepper if the answer had been " may revised but mentioned the most optimistic sales projection".. it will be OK?
jpducros no, this is answer C...
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