The Collapse of Lehman Brothers

Case Study Analysis You are required to:
Read the article adapted by Kate Lahey and Leonie Wood in Financial Accounting in the Real World 3.3.
This article is about the collapse of the financial institution Lehman Brothers.
After reading the article you are to answer the following questions in the form of a single report, in the
executive report format:
1. What does ‘window dressing’ mean in the context of this article?
2. Using Positive Accounting Theory as the basis of your argument, discuss why would the bank have tried to manipulate the financial statements by understating debt?
3. What qualitative characteristics of the IASB conceptual framework would they have potentially breached?
4. Are firms more likely to engage in ‘window dressing’ their financial statements when they have relatively high levels of debt rather than low levels of debt? Why?
5. Under Positive Accounting Theory, what are agency costs of equity and agency costs of debt? Is it possible to put in place mechanisms to reduce all opportunistic action? Discuss?
6. Using Institutional Theory as your theoretical basis, explain why an organisation might voluntarily elect to make particular financial disclosures?