Earnings announcements are often the source of fraud or the surprise revelation of fraud. Investors who suffer loses when their stock suddenly plummets based on bad news cannot afford to sit still. The time to file suit for securities fraud begins to run when the investor should suspect that fraud may have occurred. The courts often say that the time begins to run when a stock first drops.
The following articles from such sources as Businessweek, Forbes and Accounting today provide some good background on why earnings reports are often flawed:
In the future, I will discuss examples of cases where an earnings announcement began the time to file suit. Please check back.
