Answer
Accounting numbers give signals about the financial standing/robustness of an organization. Indications of accounting anomalies are the damaging price of an organization's stock. Investors can flee from an organization or the market at large once they lose faith in accounting numbers. For example, in the aftermath of the Enron scandal, other stocks in the market suffered negative effects. Besides, when Verifone experienced some accounting anomalies, Verifone’s share price dipped by 50%.
Work Step by Step
When investors have suspicions about the accounting numbers of an entity, their probability of investing in it diminishes. The efficiency and longterm stability of markets are dependent on the availability of believable accounting numbers.
