"Accounting / Auditing" Essays

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Mf Global Research Paper

Research Paper  |  4 pages (1,252 words)
Bibliography Sources: 4

SAMPLE TEXT:

Further complicating matters, the company also utilized U.S. treasuries and bets on complicated European debts. When faced with large fines, MF Global proceeded to clandestinely borrow from customer's accounts without permission in complex investments. This fraudulent, unsanctioned, leveraged borrowing was carried out under the CEO's direction, despite internal warnings from the company board, who ultimately signed off on it. According to Lee, "He pushed through a $6.3 billion bet on European debt; a wager big enough to wipe out the firm five times over if it went bad; despite concerns from other executives and board members. And it is now clear that he personally lobbied regulators and auditors about the strategy." (2012).

The instruments didn't pay off in time ultimately leading to financial failure and the declaration of bankruptcy. The Trustee for the liquidation of MF Global Inc. determined that the company executed securities transactions totaling more than $100 billion during its final week of operations, including the liquidation of customer securities. The securities included complex instruments, such as off-balance sheet repurchase transactions involving sovereign debt securities and derivative structures.

Discuss what measures can and should be taken to make it easier for corporate employees to blow the whistle on a fraudulent scheme within an organization.

Whistleblowing has to be a deliberate and carefully planned part of an organization's business strategy to be effective (Weingberg, 2003). Employees must be educated about the appropriate steps to take to voice ethical concerns. Anonymity should be allowed, but beyond that employees must feel that their report of fraudulent activity will be taken seriously and will be investigated. If the organization is unresponsive or fails to follow-up, many employees opt to take their concerns public. Perhaps most importantly, employees must feel confident that they will not suffer personal reprisals for using internal channels to report perceived wrongdoing. Fear of retaliation by management keeps many employees silent or sends them outside of the organization to expose what they know.

Many organizations now offer ethical training sessions to educate employees about ethical dilemmas unique to the organization. When these trainings also include examples of the types of activities that should be disclosed through internal whistleblowing channels, proper procedures for doing so, how management will respond, and how job security will be protected in the event of a report, it goes a long way in improving the ethical climate of an organization (Dyck, Morse & Zingales, 2010). It also allows ethical issues to be handled internally first before being made public.

Evaluate whether businesses, accounting firms, and other organizations should explicitly reward ethical behavior by their employees and executives.

Organizations punish bad behavior and reward various forms of good behavior such as exceeding goals and quotas, creativity and providing superior service. Ethical behavior is really driven by how it is encouraged and rewarded. It is important for companies to outline ethical behavior is and reward it accordingly. Reward structures need not be blatant incentives. Many organizations have found success in embedding ethical rewards into performance reviews. For… [read more]


Themido, I., A. Arantes Term Paper

Term Paper  |  2 pages (415 words)
Bibliography Sources: 2

SAMPLE TEXT:

2000: 1149). This enables even a relatively unfamiliar reader in the logistics industry to not only understand the article, but also to gain a grounding in ABC literature that can enable him or her potentially change the methodology of cost accounting within his or her organization.

It explains the terms of ABC and shows how to create an ABC logistics cross for an organization.

It illustrates the value of ABC to someone who is unfamiliar with the process by demonstrating how ABC is different from previous approaches, as well as ABC terminology and utility. It also shows how ABC can enable organizations to save money by auditing processes, rather than merely tracking expenses.

Reference

Themido, I., A. Arantes, C. Fernandes & A.P. Guedes. (2000). Logistic costs case study: An

ABC approach. The Journal of the Operational Research Society, 51 (10):…… [read more]


Accounting Methods and Taxpayer Income Term Paper

Term Paper  |  2 pages (589 words)
Bibliography Sources: 2

SAMPLE TEXT:

This practice is nearly universal among small businesspeople, and is used particularly often during prolonged stretches of difficult economic conditions. By artificially inflating or deflating income in order to reduce tax liability for a given year, cash-basis accounting allows small business owners to level the proverbial playing field, by giving them the chance to present income statements that more accurately reflect the day-to-day operations of their company.

Conversely, large multinational corporations have long used accrual accounting to manage the payroll complications of thousand-member workforces, to shield themselves from paying appropriate taxes on massive profits, and to create tax liability accounts for employee taxes. Every incorporated company in the United States must use accrual accounting, according to the generally accepted accounting principles (GAAP), and the annual financial reports and investment prospectuses sent to stockholders each year are premised on the results of this accounting method. The benefit of accrual accounting for major corporations, for which posting a quarterly loss is akin to financial suicide, lies in the practice's ability to guard against such losses. Because cash-basis accounting would result in months of steady profit being interrupted when tax bills are paid, accrual accounting allows for the formation of tax liability accounts which separate those payments into proportional allotments. This technique enables corporations to spread these losses evenly over 12 months, rather than absorb major losses every quarter which would scare off potential lenders and damage their reputation on Wall Street.

References

Accrual accounting (2010, May 09). Forbes Financial Glossary, Retrieved from http://www.forbes.com/sites/forbesfinancialglossary/2011/07/12/accrual-accounting/

Cash basis accounting. (2011, June 21). Investopedia, Retrieved from http://www.investopedia.com/terms/c/cashbasis.asp?partner=forbes-pf… [read more]


Sarbanes-Oxley Act Essay

Essay  |  2 pages (584 words)
Bibliography Sources: 1

SAMPLE TEXT:

Still, it is often difficult to legislate moral conduct and behavior. Critics of the Sarbanes-Oxley Act cite this as a weakness (Weinberg, 2003). However, I view this in another light, particularly because there are provisions in the Act that offer checks and balances that did not exist prior. It is much harder to have conflicts of interest in corporate accounting today. Auditors used to provide higher margin consulting services to audit clients. Corporate directors often lacked understanding or independence -- or both. Today, firms must register with the PCAOB which acts as an independent, non-profit, self-regulatory organization. This helps ensure standards, quality control and greater transparency in reporting. Auditors now operate under the direct oversight of the SEC.

Sarbanes-Oxley also prohibits accounting firms from doing non-audit work for clients. Services such as bookkeeping; outsourcing internal audit work; actuarial services; investment banking services; unrelated legal services; and the designing and implementing financial information systems are not permissible under the PCAOB. In addition, CEOs and CFOs must "sign off" that financial reports are accurate and "fairly present in all material respects the financial condition and results" of the company. The Act specifies "that it is unlawful for any officer or director of an issuer…to take action to fraudulently influence, manipulate, coerce, or mislead" auditors. In this way, management is held accountable. Similarly, insider trader is strictly limited and annual and quarterly reports must include off balance sheet transactions, arrangements and obligations. Excessive use of stock options as a form of management compensation is scrutinized today, and there are now stiffer penalties for criminal acts and fiscal dishonesty.

References

Weinberg, J.A. (2003). Accounting for Corporate Behavior. Economic Quarterly…… [read more]


Accounting and Corporate Governance Essay

Essay  |  5 pages (1,618 words)
Bibliography Sources: 1+

SAMPLE TEXT:

Officers must further assert that their attestation is based on their accepting personal responsibility for the effectiveness of internal controls over their financial processes. These requirements eliminate the ability of officers to claim ignorance of financial wrongdoings as a legal defense (Thomas & Klutz, 2006).

Section 404 discusses the Management Assessment of Internal Controls and works together with Section 302 to make organizations responsible for setting up adequate controls against risk. This section sets forth details for how companies must conduct their assessments thereby decreasing the likelihood of material fraud or misrepresentation of financial data. Section 409 deals with Real Time Disclosure, requiring companies to disclose information indicating a pending material change in financial or operating conditions on a current basis. This provision provides an early warning that protects investors from delayed reporting of financial events that potentially increase their losses (Thomas & Klutz, 2006).

Section 802 deals with criminal penalties for altering documents, which protects investors and the public by discourages companies from impeding a legal investigation. Section 806 encourages and protects whistleblowers, intended to help those employees disclosing instances of potential fraud. Section 807 discusses criminal penalties for defrauding shareholders, providing further investor protection against fraud (Thomas & Klutz, 2006).

Reference List

Adkins, T. (2009). Financial statement manipulation An ever present problem for investors. Retrieved April 11, 2012 from: http://www.investopedia.com/articles/fundamental-analysis/financial-statement-manipulation.asp#axzz1rldrKyTT

AICPA. (2012). Considering internal controls. Retrieved April 11, 2012 from: http://www.aicpa.org/interestareas/forensicandvaluation/resources/fraudpreventiondetectionresponse/pages/considering%20internal%20controls.aspx

AICPA. (2006 June 19). Appendix to SAS No. 99, Fraud Risk Factors. Retrieved April 11, 2012 from: http://www.aicpa.org/interestareas/forensicandvaluation/resources/fraudpreventiondetectionresponse/pages/appendix%20to%20sas%20no.aspx

Guerra, J.E. (2004 March). The Sarbanes-Oxley Act and evolution of corporate governance. The CPA Journal. Retrieved April 11, 2012 from: http://www.nysscpa.org/cpajournal/2004/304/perspectives/nv5.htm

Thomas, G. & Klutz, A. (2006). What is Sarbanes-Oxley? also Sarbanes-Oxley essential information. Retrieved April 11, 2012 from: http://www.sox-online.com/whatis.html and from http://www.sox-online.com/basics.html… [read more]


Ethical Issues Term Paper

Term Paper  |  2 pages (796 words)
Bibliography Sources: 1

SAMPLE TEXT:

Moreover, the CFO routinely overstated the value of DHB's inventory by fraudulently increasing inventory quantities, labor costs, overhead costs, and the amount of raw materials used in DHB's products. The two officers also transferred millions of dollars of expenses from cost of goods sold R. And D. costs in order to materially increase the company's gross profit (SEC, 2011).

The effect of DHB ethical issues, which compromised their accounting information system, was to overstate DHB's gross profit margins, as well as their earnings in some cases. Investors were given a false picture of DHB's operating results. The resulting misstatement of the company's financial position and profitability caused the stock price to climb, allowing the senior managers to profit by selling their own holdings at inflated prices. According the SEC, the company's former COO and CFO together profited by more than $8.2 million from the cashless exercise of warrants and their sale of over 400,000 DHB shares before the public knew about the misrepresentations in DHB's filings and financial statements.

The impact to DHB of the company's overvaluation due to the executive's massive accounting fraud was to force the company into filing bankruptcy. The company was also forced to restate its financials and settle with the SEC. DHB's stock price declined by more than 45% in 2006 following information becoming public about the company's accounting fraud along with the resignation of the CEO and CFO.

The role of the accountant has changed following the passage of the Sarbanes-Oxley (SOX) Act of 2002. Due to SOX provisions, certain consulting services, internal audit outsourcing along with certain other activities routinely provided to clients in the past became illegal when performed by the audit firm. The new restrictions on the practice of auditing were intended to strengthen auditor independence (Gantt, Generas & Lamberton, 2007).

Works Cited

Cohn, M. (2011, November 10). Body armor execs settle accounting fraud charges. Accounting Today for the Web CPA. Retrieved January 13, 2012 from: http://www.accountingtoday.com/news/Body-Armor-Execs-DHB-Point-Blank-Settle-Accounting-Fraud-Charges-60767-1.html

Gantt, K., Generas, G., & Lamberton, B. (2007, September). Sarbanes-Oxley, accounting scandals, and state accountancy boards. The CPA Journal online. Retrieved January 13, 2012 from: http://www.nysscpa.org/cpajournal/2007/907/essentials/p18.htm

Norris, F. (2011, March 3). For boards, S.E.C. keeps the bar low. New York Times website. Retrieved January 13, 2012 from: http://www.nytimes.com/2011/03/04/business/04norris.html?pagewanted=all

Securities and Exchange Commission. (2011, February 28). SEC charges military body armor supplier and former outside directors with accounting fraud. Retrieved January…… [read more]


Accounting Standards and Concepts Violated Research Paper

Research Paper  |  5 pages (1,561 words)
Bibliography Sources: 4

SAMPLE TEXT:

The PCAOB also has a history of announcing disciplinary actions primarily against small firms as opposed to the big accounting firms that generally audit the largest companies. The board also participates in the revolving door practice that employs auditors with ties to the industries that they regulate, allowing shuttling back and forth between jobs with each. Lynn Turner, former chief accountant at the Securities Exchange Commission, said he gives the board "a B. For its routine inspections of accounting firms, a C. minus or D. plus for its standard-setting and an F. For enforcement" (Hilzenrath, 2010, p.2).

PCAOB Improvements

According to industry consultant Francine McKenna, the following recommendations would improve the PCAOB:

Eliminate the revolving door and enact stricter rules regarding post-PCAOB employment.

Remove obstacles to inspections of international firms so that information is shared between countries and firms are actually held accountable.

Make Part 2 of inspections reports publicly available, which currently remain nonpublic if the firm addresses them to the Board's satisfaction within 12 months after the issue date.

Give the PCAOB the power, under law, to review or stop mergers and acquisitions by firms that are contrary to the public interest or that may cause independence violations.

Put teeth into the inspection process so that audit firms bear consequences for their failures (McKenna, 2010).

Works Cited

AICPA. (1972). AU Section 560 Subsequent Events. Retrieved December 2, 2011 from: http://www.aicpa.org/Research/Standards/AuditAttest/DownloadableDocuments/AU-00560.pdf

FASB. (1981). Statement of Financial Accounting Standards No. 48). Retrieved December 2, 2011 from: http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=id&blobwhere=1175820909255&blobheader=application%2Fpdf…… [read more]


Internal Auditor, the External Case Study

Case Study  |  4 pages (1,335 words)
Bibliography Sources: 5

SAMPLE TEXT:

com, n.d.).

The CFO is responsible for presenting and reporting accurate and timely historical financial information for the company. Every stakeholder in the company, including shareholders, analysts, creditors, employees and other members of management, all rely on the accuracy and timeliness of information that the CFO is responsible for. It is imperative that the information be accurate because so many decisions are based on it (Investopedia, 2011).

The CFO is also responsible for the company's financial condition, which means he or she must decide how to invest the company's money, while taking into consideration such factors as risk and liquidity. Also, the CFO manages the company's capital structure, one of his or her most important duties, and determines the optimum mix of debt, equity, and internal financing (Investopedia, 2011).

In addition to other duties, the CFO is responsible for economic strategy and forecasting, and is an integral part of the company's financial future. The CFO must be able to identify and report what areas of the company are most efficient and make decisions as to how the company can capitalize on this information. The CFO must be able to pinpoint which products or services make the most money for the company, and decide how this information can best be used to improve the company. The CFO's duties then include economic forecasting and modeling, that is, trying to predict, given multiple scenarios, the best way to ensure the company's future success. The CFO's performance is judged by his or her ability to project the company's long-term financial picture, and by how the company thrives based on his or her analyses (Investopedia, 2011).

Inherent conflicts can arise between the internal and external auditors' roles when the external auditor examines and renders opinions in areas that would seem to critique the way the internal auditor does his or her job, such as evaluation of controls or processes and prevention of fraud. They may also differ significantly in their assessment of risk. The CFO and external auditor may differ in whether the company's statements conform with GAAP; whether the statements fairly present the financial position of the organization, and whether the financial statements have been materially affected (Institute of Internal Auditors, 2010).

One example where they could have different opinions regarding balance sheet items could be with respect to laying off employees and the makeup of their severance packages. The external auditor may focus on the timing of layoffs and recognition of liabilities, the internal auditor may be concerned with the impact of layoffs on his fellow employees and whether operations and internal controls will be negatively affected, while the CFO may be more concerned with the company's overall reputation, the stock price, and bottom line profitability.

Conflicting viewpoints like these can be mitigated up to a point by having clear descriptions of the scope of work of each individual, clear communication of company's goals and objectives, and by agreeing to disagree in some cases. Ultimately though, such disagreements may be irreconcilable, because few… [read more]


Auditing Fair Value the Explanatory Essay

Essay  |  11 pages (3,048 words)
Bibliography Sources: 0

SAMPLE TEXT:

Auditing Fair Value

The explanatory note accompanying Roman Holiday's financial statements details accounting policies they used in the preparation of their 2007-year-end financial statements. The most relevant assertions regarding the reacquired franchise rights involve the client's valuation approach and impairment testing. The client accounted for the value of reacquired franchise rights by determining the excess of the net amount assigned… [read more]


Fraud Positive Accounting Theory Essay

Essay  |  1 pages (327 words)
Bibliography Sources: 0

SAMPLE TEXT:

Each of these hypotheses explains a different incentive structure for the manager to commit accounting statement fraud. In the first, the manager will move profits from future periods into the current period. Even if they would receive a bonus on that money in the next period, that future dollar is discounted so the manager is incentivized to move it to the current period. In the second, the manager also movies earnings to the current period from the future period, making it less likely to violate a debt agreement -- though technically they are incentivized to attempt to move the earnings into any period that would not violate the agreement. In the final one, having more earnings can lead to increased political pressure. This could also lead to new taxes or even regulations for large firms or industries.… [read more]


Leslie Fay Company Case Essay

Essay  |  2 pages (630 words)
Bibliography Sources: 2

SAMPLE TEXT:

Answer 2

If SOX is followed, there is no specific test name that can be specified in the case under consideration. However there are other audit tests available which could help in detection of fraud and irregularities. One such test is Model Audit Rule (MAR) test that allows firms to check for irregularities through an independent auditing committee. Even though this test applies specifically to insurance companies, it can be just as easily applied to other sectors. This test recommends choosing an independent auditing company which is selected by the auditing committee and would meet with the management to determine if the company's financial reporting has been on track.

Even compliance with the two important tests of SOX would help companies like Leslie Fay from suffering so massively due to one person's unethical behavior. These two tests are rather the two steps that must be followed in order to comply with SOX guidelines. For one companies need to have a system of internal controls and secondly, it must meet with independent auditors who are registered with the government to see if these internal controls are truly effective or not.

Again it must be mentioned that SOX or MAR are as effective as their implementation in an individual firm. There is no guarantee that any audit test would be prove to be acid test for financial reporting activities, still it is believed that these standards should be present to check for financial oversight. They may not completely protect against fraud but they would at least serve as a deterrent or at least that is what we hope they can achieve. The whistle blower protection program under SOX can also be effective in early detection as some people are bound to discover financial irregularities sooner than others and these p[people can report the irregularities if they don't fear being outcast or treated unfairly by…… [read more]


Accounting Process and Financial Statements Term Paper

Term Paper  |  5 pages (1,533 words)
Bibliography Sources: 4

SAMPLE TEXT:

Second, the cost of sales reflects the cost of inventories purchased for resale that were sold. When total sales revenue equals the total cost of producing the revenue, there is no profit or loss exists, thus establishing the breakeven point. If total sales revenue exceeds total cost of producing the revenue, then a profit exists. If total sales revenue is less than the total cost of producing the revenue, a loss exists. The income statement shows the ending results of operations as of a specific date for a specific period.

In conclusion, accounting is not a static system but rather a dynamic process that incorporates generally accepted accounting principles (GAAP) that "evolve to suit the needs of financial statement readers, such as business managers, equity owners, creditors, and governmental agencies with meaningful, dependable information."

Sources

BASIC FINANCIAL ACCOUNTING REVIEW: media.wiley.com/product

Smith; Outlines & Highlights for Financial Accounting Basics. AIPI; 3 edition (October 19, 2006).

Stickney, Clyde P., Weil, Roman L.; Financial Accounting: An Introduction to Concepts Methods, and Uses. South-Western College Pub; 10 edition (July 2, 2002).

Maher, Michael W., Stickney, Clyde P., Weil, Roman L.; Managerial Accounting: An Introduction to Concepts, Methods and Uses. South-Western College Pub; 10 edition (March 13, 2007)

Roman L. Weil (Author)

> Visit Amazon's Roman L. Weil Page

Find all the books, read about the author, and more.

See search results for this…… [read more]


Accounting Cycle for La Rue Research Paper

Research Paper  |  3 pages (915 words)
Bibliography Sources: 1

SAMPLE TEXT:

At the beginning of each month, Keri balances the previous month's journals, ensuring all credits and debit have entered the business account. Once all transactions have matched and her accounting journals, are balanced and matches the computer, Keri closes out the prior month's accounting. If there are any discrepancies she must go through the records to find the mistake and make the necessary corrections. If there are missing credits to her account she must find the credit card receipt to call the bank. Keri also pays all bills on Tuesdays and order new inventory to replenish the low inventory. Keri pays herself and her one employee twice a month on a salary basis. If there are temporary staffs used, she pays the staffing agency for the services utilized.

Since La Rue Catering is a small business, at the end of each quarter Keri has an accountant who closes the quarter for her, by preparing her balance sheet, and income statements. The accountant verifies Keri's accounting cycle by looking at her journals, QuickBooks and receipts. The accountant also reconciles Keri's bank account with her QuickBooks software, to ensure all debits, credits and checks are entered. Once all reconciliation is completed for this business, the accountant pays the quarterly business taxes to ensure La Rue Catering is up keeping her tax obligation.

La Rue Catering has three main persons involved in the accounting cycle, the employee who is mainly involved in taking orders, collecting payments and working with inventory. Keri is the main accounting person for business, handles the weekly balances; she also does the payroll, pays bills and order new inventory. Keri is also responsible the weekly or monthly reconciliations, and making bank deposits. The role of the accountant in this business is to ensure that Keri's records are complete and accurate. The accountant also acts as a check and balance system for business, ensuring that Keri's taxes is paid, records are in order, and other financial obligations are met.

Conclusion

In conclusion the accounting cycle for each business is different, however they do share same goals of ensuring the proper debits and credits are posted to the business account and the accounts are reconciled. La Rue Catering's owner Keri does most of the accounting cycle herself, however she has an accountant that comes to her business to ensure everything was done properly. The employee is mainly involved in the inventory and sales aspect of the accounting cycle. The accountant's main role is to ensure all financial documents are in order and all financial transactions are recorded.

References

The accounting process. (2010). Retrieved on November 19, 2010 from http://www.netmba.com/accounting/fin/process… [read more]


SEC Ictv the Securities Case Study

Case Study  |  2 pages (511 words)
Bibliography Sources: 1

SAMPLE TEXT:

Respondents' conduct, as further described below, constituted improper professional conduct within the meaning of Rule 102(e)(1)(ii) and (iv) and Section 4C

of the Exchange Act."

Analysis

The SEC is correct in going after the auditors in this situation for two good reasons. The first reason is that the accounting standards were wrong and ICTV had an intent to deceive and cheat their way to the top. The competitive atmosphere that capitalistic endeavors must compete within makes the SEC's job of regulation very difficult. Oftentimes, accountants are rewarded with bonuses and raises when they find new ways of exploiting loopholes within policies and laws. This environment is sure to breed cheaters.

The second reason the SEC should go after the auditors in this situation is to help raise the levels of standards for accounting professionals. Certified Public Accountants. Have a professional and civic duty to represent the public's best interests, when this fails to happen, a necessary correction in the system should most definitely be applied.

Since leadership is usually given credit for successes, the same should be applied in cases such as these were disastrous failures have occurred. The responsibility of the performance of the accounting firm begins at the top and should point downwards from there. All leaders within this organization, including the CFO and CEO, should be held responsible for their actions.

References

The United States Securities and Exchange Commission. Administrative Proceeding 3-997, 20 Jan 2007. Retrieved from http://www.sec.gov/litigation/admin/2011/34-63740.pdf… [read more]


Regulating the Accounting Industry Term Paper

Term Paper  |  2 pages (635 words)
Bibliography Sources: 1+

SAMPLE TEXT:

Chairman Pitt said in a speech in January, "Our disclosure and financial reporting system is still the best in the world, but it has long needed improvement. Its inadequacies are more visible after Enron's failure, and the need for change cannot be ignored any longer" (Pitt).

Clearly, the current system is flawed, if a multi-million dollar company such as Enron can fool the public, the SEC, and its accountants, and go broke in a matter of weeks. Arthur Anderson, for whatever reasons, did not detect the problem, or chose to ignore it. Either way, the situation has ruined thousands of lives, and changed the way America (and the world) views accounting firms. I believe in order to gain the public trust once more, there needs to be a major overhaul of accounting regulatory practices. Even if the SECs findings and proposals are not enough, as many people now believe, something must be done to ensure that this scandal cannot happen again.

The SEC says, "A strong accounting profession is key to our capital system, and we are firmly committed to assuring that it functions properly, expeditiously and in the public interest" (Pitt), and I agree. The accounting industry must also conduct itself with the highest standards. They must separate accounting functions from "management advisory" functions, and their conduct must be impeccable. Without tougher standards, that people can truly rely on, the accounting industry may never appear trustworthy again.

Works Cited

Amato, Theresa. "How to Prevent the Next Enron Swindle." Citizen Works. 21 January 2002. http://www.citizenworks.org/citizensagenda.html

Author not available. "SEC Prescribes Weak Cures for Accounting Industry's Ills." USA Today. 18 January 2002. pp. 14A.

Editors. Accounting Malpractice.com. 2002. http://www.accountingmalpractice.com/

Pitt, Harvey L. "Public Statement by SEC Chairman: Regulation of the Accounting Profession." U.S. Securities and Exchange Commission. 17 January 2002. http://www.sec.gov/news/speech/spch535.htm… [read more]


SEC Internet Exercise - Kmart Term Paper

Term Paper  |  5 pages (1,327 words)
Bibliography Sources: 1+

SAMPLE TEXT:

The Annual Report for 2001 is based on the audited information. The Kmart website gives complete financial information on its website through links to other services and websites such as the SEC. The following audited Balance Sheet was obtained from Nasdaq.com (http://www.nasdaq.com/asp/ExtendFund.asp?kind=extendfund&symbol=KM&selected=KM&documentType=balance&period=ann) asthe link to the 2001 Annual Report on the Kmart site did not seem to function.

Annual Balance Sheet

Get Quarterly Data (values in 000's)

Period Ending:

Current Assets

Cash and Cash Equivalents

Inventory

Other Current Assets

Total Current Assets

Long-Term Assets

Fixed Assets

Other Assets

Deferred Asset Charges

Total Assets

Current Liabilities

Accounts Payable

Short-Term Debt/Current Portion of Long-Term Debt

Total Current Liabilities

Long-Term Debt

Other Liabilities

Total Liabilities

Redeemable Stocks

Stock Holders Equity

Common Stocks

Capital Surplus

Retained Earnings

Total Equity

Kmart provides an excellent Investor Relations section of their website. It contains more than enough information to make a wise investment decision. For convenience it has provided information from other websites, which you can acccess from their website without searching for it yourself. They have links to the SEC website and Yahoo!Finance to name a few.

Question

The Kmart website offers the current and historical stock prices for the company. This service is provided by Yahoo!Finance and gives the last 15 minutes stock price. The end of day closing price for Kmart on June, 19, 2002 was 0.86. The closing price for yesterday as reported on www.nasdaq.comwas0.87. This is due to the fact that one site rounds and the other does not round the last digit. Other good sources of information are Morningstar and the Wall Street Journal. Stock information for Kmart is most easily accessed through their own website, rather than through another source.

Question

As a protection to investors to insure that the companies issue accurate and true financial statements, the SEC requires that the firm hire an independent auditor to audit the financial statements of the company. This is to ensure that the information given in the financial statements is not misleading. As a result of this, the SEC has decided to look to the Independence Standards Board (ISB) for guidance in what is considered to be an independent audit of the financial statements released to the public. The SEC had formerly adopted it own rules for the determination of what constitutes and independent audit. These rules were found to be inadequate. As a result many of the so-called "third-parties" were found to have a financial interest in the company that they were auditing. The ISB was formed to adopt better guidelines for independent auditor/company relations.

Question

The American Federation of Labor and Congress of Industrial Organizations (the "AFL-CIO") petitioned the SEC to amend the rules to revise the definition of an independent auditor and that they place a limit on the services that an auditing firm may provide for their clients. The AFL-CIO and members lost a large amount of money in the Enron scandal and they do not feel that the current ruling is sufficient. They have proposed such measures… [read more]


Government Accounting Office in America Term Paper

Term Paper  |  10 pages (4,599 words)
Bibliography Sources: 1+

SAMPLE TEXT:

In its 1980 report, the Subcommittee recognized that higher fourth quarter obligations may not indicate a problem with wasteful spending. The Subcommittee noted that spending at year- end may be the result of legitimate, planned, and worthwhile spending intended by Congress. However, the Subcommittee found numerous examples in which agencies took short cuts in the last few weeks of the… [read more]


Future of Accounting the Business Term Paper

Term Paper  |  3 pages (1,143 words)
Bibliography Sources: 1+

SAMPLE TEXT:

This is one of the trends accounting will follow, with the demand for accounting consultants increasing in the future.

It is also important to note the impact this has on the required skill levels of accountants.

The focus on providing a range of services means that accountants need a broader knowledge and skill base. This extends from a knowledge of different areas of accounting, to a knowledge of other business areas. Many accountants will be expected to be able to offer a range of skills, rather than specialize in one skill and will also need to be flexible. This gives the accountant the ability to meet diverse client needs. One study of the changes in the accounting field, describes how some organizations realized the changing situation and adapted to it,

One of the early warning signs that major changes in accounting education were needed came when major CPA firms reengineered themselves as "professional services" rather than "public accounting" firms... Unlike the academic community, CPA firms were quick to realize that new business realities demanded a broader set of competencies" (Gabbin).

The approach of CPA firms illustrates the approach that will be required in the future. Organizations will demand a broader range of competencies and the accountant with this broad range of skills will be in high demand.

Other skills future accountants will benefit from are those that contribute to the changing business environment. One of the major changes in the business world is the reduction of trade barriers and the opening up of the international trade market. This has led to a major increase in global businesses. To meet these requirements, organizations need accountants that can operate in this global business world. Accountants with international experience are well placed to be in high demand. Accountants with other useful skills, such as knowledge of other languages will also be in demand. As one report describes, "There is high demand for individuals who can go beyond technical skills and display good interpersonal abilities, legal knowledge sales abilities and foreign language skills" (Ravine). These are all important qualities because they meet the demands of the global business environment. With international trade expected to increase in the future, this will lead to greater demand for accountants with these skills.

The current trends and future predictions for the management accounting industry have now been described. It has been seen that accounting employees will be treated more like business partners, than employees. It has also been seen that there will be an increase in the demand for business advisory services and for consultant accountants that can provide a wide range of services. The skills accountants require will also change, with flexibility and a broad range of skills desirable. Accountants with skills that will allow them to work effectively in the international market will also be in high demand.

Works Cited

Gabbin, A.L. "The crisis in accounting education; the CPA's role in attracting the best and the brightest to the profession." Journal of Accountancy. April 2002. 7… [read more]


Accounting and Intrusion Detection Term Paper

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Today, accounting involves more analysis and cost-based decision making. The accounting department will often be called upon to participate in cost benefit analysis, vendor selection and implementation of financial systems as well as decision making, budget approvals and oversight of systems organization-wide. In organizations where the Information Systems department is not centralized or in smaller organizations, the accounting department may… [read more]


Inherent Limitations of an Audit Term Paper

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Also, because testing is used rather than 100% checking, and also there are imperfections in the internal control system of a company.

There is also a higher risk that fraud goes undetected. This is because the perpetrator of the fraud is also likely to take steps to cover it up. Also, if there was collusion by many people, ant they take steps to cover it up, then it is even more difficult to detect.

The risk of an auditor not discovering such fraud is higher the higher up the person perpetrating the fraud is in the company.

The opinion of the auditor is based on the concept of obtaining "reasonable assurance." major problem is the expectations gap, between what the users of financial statements think the auditors report means, and what it actually means. People are of the opinion that a clean auditors report is a clean bill of health of the company. The investing public is also generally of the opinion that the auditor is supposed to detect fraud and error. The auditor is not a law enforcement officer, and it is not his job to actually look for frauds. The purpose of an audit report is to state whether the financial statements present a true and fair view of the entities operations. There has been an incentive by many accountancy bodies around the world to educate the users of the financial statements about what an audit report actually means. Also, an auditors report generally states that "in the auditors opinion" the financial statements are presented "fairly," "in all material respects." The exact wording and terminology may be a bit different for the report according to the region and the local auditing standards. It also states that the responsibility of keeping the books…… [read more]


Accounting as I Pursue Term Paper

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In addition, there is a strong demand for senior accountants with three to five years of experience.

Recent studies reveal that accounting positions are expected to increase at least as fast as the average for all occupations through the year 2006 (Silver, 2003). The job market will be driven by the need to replace accountants and auditors who retire or transfer to other occupations.

In addition, as the economy improves, the number of business establishments will increase, creating further demand for accountants to set up books, prepare taxes, and provide financial management advice (Cabrillo College, 2003). As more businesses grow, the volume and complexity of information developed by accountants regarding costs, expenditures, and taxes will grow as well. More opportunities will arise for accountants as the result of changes in legislation pertaining to taxes, financial reporting standards, business investments, mergers, and other financial matters.

The changing role of accountants and auditors also will spur job growth (Cabrillo College, 2003). Accountants will perform less auditing work due to potential liability and relatively low profits, and less tax work due to growing competition from tax preparation firms, but they will offer more management and consulting services in response to market demand.

Accountants will continue to take on a greater advisory role as they develop more sophisticated and flexible accounting systems, and focus more on analyzing operations rather than just providing financial data. Internal auditors will be increasingly needed to discover and eliminate waste and fraud.

Concerns About Future in Accounting

In an ever-changing business environment, the accounting industry often seems like a shaky one. The business environment in the United States is dominated by technology, globalization and "the concentration of power in certain market investors, primarily large mutual and pension funds," according to a recent report (Kelcher, 2000). These changes have resulted in inexpensive information and increased competition, which have made many changes in the business environment, including changes in accounting.

One of my major concerns regarding my future as an accountant is the fact that technology has reached amazing levels and has replaced accountants in many smaller firms. Software, such as TaxChecker, enables businesses to perform complete IRS audits on their own return, project income for tax purposes for the coming year, and abate penalties imposed by the IRS (Magill, 1997).

Therefore, many individuals, businesses and tax professionals no longer need accountants and auditors avoid making mistakes that might red flag an audit. As a result, many accountants are faced with concerns that they may be replaced by technology. This has actually led to a decrease in the number of students who elect accounting as their major.

Another major concern of mine is fear of boredom. Many of the accounting classes that I have taken involve statistics-oriented, number-crunching sessions for hours on end. This can get rather mundane and sometimes even gives me a headache. Therefore, I am a little worried that counting might be a stressful field for me.

However, these concerns are easily relieved when I look at the… [read more]


Awarding Audit Contracts by U.S Term Paper

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Chapter 3 - LITERATURE/DESKTOP RESEARCH

3.1 Summary

The information available for researching this project was based on a cross-section of materials. Although this was an immense task because of all the government guides available on the subject, not to mention non-government materials, most of it was readily available on the Internet.

Some of the major websites that provided basic information… [read more]


Accounting Costs - Sunair Boat Term Paper

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"

Clearly the accounting department at the company (as well as management) needed a benchmark upon which to base their evaluation of the firm's costs and operations. Also, one has to assume that Randy Kern (molding department supervisor) and Bill Schmidt (the accountant) knew what they were doing when they chose the standards and so they must have a certain degree of legitimacy and meaningfulness. Likewise, President Jan Larson is certainly correct when he admits that: "Well, some variances are inevitable." Still there is some room for constructive criticism with regard to SunAir's choice of standard costs.

Given the complexities of the manufacturing process alluded to above, it is possible that the standards set by the accounting and molding departments were too rigid. After all, actual material amounts as well as the amount of labor needed to produce a hull are dependent on "eyeball" and "personalized" supervision. Therefore some flexibility is certainly needed on these production inputs. Fixing glass cloth at 120 sq. ft and glass mix at 40 lbs for each boat may have been too conservative. This is especially the case if batches of fiberglass are regularly "freezing" in their kettles. Some allowance must be made for this possibility.

Also, considering material price as fixed over long periods of time can be inaccurate. While the price of glass cloth at $2.00/square foot and glass mix at $3.75/pound may have been accurate when Randy Kern and Bill Schmidt first settled the issue, prices change on a regular basis. Perhaps the accounting department should check pricing of these inputs on a monthly or other more frequent basis. This type of regular update could considerably lower the observed variances.

Question Three

The following table depicts the budgeted and actual gross margins for the month under consideration as well as the variance between the two. Assumptions made here are that only 430 boats were actually produced even though the company planned to build 450. Also, any other production costs (other than the molding costs) were assumed to be $914.33 per boat.

SunAir Boat Builders, Inc.

Statement of Gross Margin

Actual Sales

Budgeted Sales

430 Boats)

450 Boats)

Variance

Sales Revenue

Standard…… [read more]


Accounting This Discussion Contains Research Term Paper

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(Financial Reporting under the Cash Basis of Accounting, 2000)

The International Federation of Accountants explains that;

When preparing the financial statement an assessment of an entity's ability to continue as a going concern should be made. The assessment should be made by those responsible for the preparation of the financial statement. When those responsible for the preparation of the financial statement are aware, in making their assessment, of material uncertainties related to events or conditions which may cast significant doubt upon the entity's ability to continue as a going concern, those uncertainties should be disclosed."

Obviously a firm's failure to properly disclose information that may be beneficial to stakeholder can distort the actual size and success and a firm. To void the alienation of stakeholders a firm must provide statements that are material. The international federation of accountants explains,

Information is material if its non-disclosure could influence the decision-making and evaluation of users about the allocation and stewardship of cash resources, and the performance of the entity, made on the basis of the financial statement. Materiality depends on the size and nature of the item judged in the particular circumstances of its omission. In deciding whether an item or an aggregate of items is material, the size and nature of the item are evaluated together. Depending on the circumstances, either the size or the nature of the item could be the determining factor. For example, individual receipts with the same nature and function are aggregated even if the individual amounts are large. However, large items which differ in nature or function are presented separately. " (Financial Reporting under the Cash Basis of Accounting, 2000)

In an effort to produce a financial statement does not distort the financial condition of the company accountants must examine whether or not an organization is deemed to be an ongoing concern. (Financial Reporting under the Cash Basis of Accounting, 2000) business may contribute to accounting distortion by ignoring some very simple indications of ongoing concern which include; the number of financial and debt assets, the ability to alter tax levels and the sustainability of the firm's physical stance. (Financial Reporting under the Cash Basis of Accounting, 2000)

Distortion can also be prevalent when accountants fail to retain information in the years prior to the current period. In other words, the financial statements must be presented in a manner that is consistent if the business desires to avoid distortion. It is possible and plausible that a company can abandon a certain presentation style but only if they have revamped their entire financial system. (Financial Reporting under the Cash Basis of Accounting, 2000)

Conclusion

The purpose of this discussion was to examine whether financial statements prepared on a cash basis of accounting may distort the portrayal of financial position and operating results of a business. Our investigation concluded that there are several issues that evolve in using cash basis accounting. We concluded that businesses must be aware of these issues and deal with them to prevent distorted… [read more]


SAS Number 99 Term Paper

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With the American Institute of Certified Public Accounts SAS 99, external and internal auditors will be ale to create effective partnerships with the sole intention of detecting and also preventing fraudulent reporting. The American Institute of Certified Public Accounts has demonstrated that they feel strongly about these obvious fraud attempts and have therefore convinced its members to adopt the SAS 99 standard as soon as possible.

The American Institute of Certified Public Accounts main objective is to prevent future misstatements with no exception for those caused by fraud or error. Some of the key provisions of the new American Institute of Certified Public Accounts SAS 99 standards are: 1.) All auditors will now be required to gather data that helps identify all risks that could result in a misstatements or fraud. Those experts in General ledger can be asked for any relevant back-up information with a focus on all manual journal entries. Have readily accessible full documentation of those entries; 2) all auditors will now be required to evaluate their clients programs or controls; 3) all auditors will now also be expected to focus on any issues where management can override controls; 4) all auditors will now be required to examine journal entries and/or other adjustments for possible misstatement or fraud; 5) all auditors will now be required to review any accounting estimates for legitimate biases that could lead to misstatement or fraud; 6) all auditors will now be required to evaluate business rationale for significant or unusual transactions.

These new requirements will add plenty of additional pressure on whoever is responsible for a company's general ledger. Whenever management has veto or overwrite controls available to them, bells and whistles will need to go off in an auditors head if he understands the American Institute of Certified Public Accounts SAS 99. Two main ideas are evident in the American Institute of Certified Public Accounts' directives. All auditors are expected to make sure through due diligence that a company's books are what they say they are and should not contain unwarranted estimation or speculation. Any interpretation or manipulation in the books should be reviewed thoroughly and should be considered highly suspect first. The most obvious interpretation of SAS 99 is that although it is not clearly worded, it is implied that auditors will be held accountable.

In conclusion, this report attempted to explain how the new American Institute of Certified Public Accounts SAS No.99 will change the way accounting firms will be required to conduct corporate audits. As the collapse of Enron and the scandal at WorldCom, continue to dominate the American media circuits, the American Institute of Certified Public Accounts have issued their standards meant to eliminate these types of problems from occurring in the future. SAS 99 provides an opportunity for both external and internal auditors to discuss and gather facts to eliminate the possibility of fraud.

Works Cited

BBCi. "Enron finance chief denies charges" BBC International. http://news.bbc.co.uk/1/hi/business/2756345.stm6 November, 2002..

BBCi. "Ex-WorldCom Finance Boss Indicted." BBC International. http://news.bbc.co.uk/1/hi/business/2222137.stm28 August… [read more]


Professional Accounting Services Are Paramount Research Paper

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It is evident that the introduction provided herewith is longer than the previous transmittal letter and may be longer than a page. The subject and the purpose of the report are identified in this section. The purpose of the report must be clearly identified to its fullness. All the areas addressed in the report are identified in this section and the background of the topic is provided succinctly. The body of the report is comprehensive in nature. It may contain many sections, subsections, topics, and subtopics. Illustrations used to foster the understanding of the identified topics are also found in this section. A conclusion offers a summary of the main ideas (May & May, 2012).

Parts of a Report: Optional Appendices, Notes & Bibliography, and Graphic Illustrations

Any report may contain optional sections like appendices. Notes, bibliography, and graphical illustrations are essential. The appendices may contain technical statistical information, which may not be useful to the entire audience. However, an appendix must be referred in the main body of the report. It is also important to appreciate outside sources used in preparing the report. This is achieved via the listed bibliography at the near-end of the report. Other illustrations not used in the main body are found in this section as graphic illustrations. The list of illustration falls under this part of the report as it also appreciates the outside information used (May & May, 2012).

Appearance, Style, and Tone

The appearance, style, and tone of any report will influence the way it will be received and adopted by the audience. The authors have emphasized on the importance of ensuring that the report is neat and presentable by using the appropriate font and style. The best quality paper must also be used in the case of printing. A formal report should always remain formal; it should be readable and interesting. Whereas the transmittal document can be written with the use of personal pronouns, the main report should not (May & May, 2012).

Conclusion

Accounting reports are essential documents, which must be presented appropriately in the most formal ways possible. This study has identified the most critical section of such reports; they include the introduction, the body, and conclusion. The study has also identified that other important sections included transmittal document, title page, table of contents, list of illustrations, and summary sections.

Reference

May, C. & May S. (2012). Effective Writing: A…… [read more]


Accounting Report Generation, Tackling Exercises Essay

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The handler is expected to orient clear, concise, distinctive and reports, which are free of grammatical errors. Proper time management skills are essential in any professional environment. The reports should have concise thesis statements written to address the board of executives. Other considerations include the body and the conclusion.

Exercises

The chapter has also specified potential exercises to be tackled in full filling essay exam and professional exam requirements. Exercises are short case studies in which the handler is expected to respond in a scholarly manner. The chapter has further specified auditing and tax systems as categorical subsections that the handler must consider. In each subsection, the handler is expected to provide a decisive essay examining the background, definition, history, effects and a consequential recommendation. The responsive essays should have a concise thesis statement.

Five or more ideas or concepts that will help the author become a better communicator

In general, the author has presented three learning methodologies based on the learning approach of teaching. Nonetheless, the nature of how ideas are being conveyed is questionable. Firstly, the author has failed to consider the usefulness of an introduction on each category. In any case, the introduction presiding in the first section, essay exams, fails to orient a realistic definition on essay exams. Secondly, the presentation techniques are not professional. For instance, italicizing subheading is not validated. Professionally, there is no need of putting flashing neon lights in a document (May & Gordon, 2012, p. 216). Thirdly, some sentences are not readable. The author could have considered using the bulleted points when passing across such important techniques. Besides, circling chapter is not professional. This applies to number five (estimated time- 15-25). The author could have considered sub-headed that piece of information differently.

Conclusion

This analysis has focused on the importance of exams (technical or essay) in an accounting environment. In particular, the analysis has presented the accounting exam approaches, including essays, professional, and exercises. While essay exams and exercises are academic, professional exams are industrial and technical in nature. Therefore, the configuration of each learning methodology is largely related to the quality of output from the learner (accountant). However, all of them are important in one way or the other in one's professional development.

References

May, C, & May, S. (2012). Effective Writing: A Handbook for…… [read more]


Accounting Profession Is a Necessary Research Paper

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The authors argue that a draft is important because it appreciates the possible changes that will occur during the study. An individual can alter significant amount of information, adopt new ones, and drop the redundant ones. This can be facilitated by the request and scholarly advice from colleagues. A good accounting journal should have proper references supported with the use of graphics and previous researches. Professionally oriented documents must be informative: appropriate usage of language, formatting, and data orientation techniques are critical. Additionally, the document should also satisfy all the English grammar needs, be consistent, and devoid of colloquial speeches.

Submitting the Article

Once the acceptable levels of the research have achieved, it is advisable to submit the article to the relevant authorities for reviewing. A justification letter as to why the research must be published should accompany the article. In analysis, the chapter also specifies that a good article have greater chances of being published. An article that deserves a publication must be appealing to the reader, general practitioners, and other stakeholders in this field.

Publication assessment (Other)

This summary supports the concept publication assessment because of the underlying advantages associated with it. Primarily, the publication assessment suggested in this study will appreciate the importance of follow-up mechanisms when making editions of the publication. The publication assessment program will seek the cooperation of investors, accountants, and scholars. In any case, the researcher is expected to filter relevant information from irrelevant ones. The publication initially developed sought on to clarify on the efficiency of conducting concurrent auditing system.

Conclusion

Journals are important sources of verified and scholarly reviewed information. They are journals are collectively developed by individuals who are well equipped with the accounting discipline. This document identifies the proper procedures and methods of developing a potential publication. The document suggests that the researcher must focus on a contemporary topic that resolves an accounting problem.

References

May, C, & May, S. (2012). Effective Writing: A Handbook for Accountants. New York: Pearson…… [read more]


Community Power Structures Assessment

Assessment  |  2 pages (582 words)
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There is also an outline of the specific issues that a number of different types of not-for-profit organizations will face in their accounting, and how to handle each of these in turn. Issues like different types of accounting such as cash basis are covered here. Accounting for churches, museums, performing arts foundations, clubs and private foundations is all provided.

Chapter 20 highlights budgeting, and the issues that surround that process for not-for-profit organizations. The budget is basically a plan of action and the financial pathway for getting to the objective. There are different ways to prepare a budget, and these are outlined in the reading. Cash flow is a major issue, so critical concepts with respect to revenues, strategic reserves and monthly/quarterly budgets are all covered. The issue of responsibility is also discussed -- senior management may make strategic decisions but somebody familiar with accounting needs to be in charge of the budget. Budgets are also used as a control mechanism, which is important to remember, because that highlights the need for a superior budget.

Chapter 24 highlights the role of audits in not-for-profit accounting. Independent audits are an important form of control, because third parties examine the financials and ensure that they are accurate and reflect the organization's financial condition. The chapter explains the auditor's opinion, which is a formal statement with specific meaning. The benefits of audits are outlined, mainly relating to control, and the process of selecting an accounting for the audit is also covered in this chapter. Audit committees are usually charged with oversight of the auditing practice. Some of the audit tools are also explained, but the chapter is mostly an introduction to the concept of auditing and does not provide in-depth explanation of the…… [read more]


How Repo 105 Accounting Worked for Lehmann Brothers Term Paper

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¶ … Lehmann Brothers

Repo 105 was a method of accounting that allows Lehmann Brothers to conceal billions of dollars in unprofitable assets from the public eye. The financial institution arranged to sell packages of Treasury bonds, Eurobonds, mortgages, and other bad investments at the end of an accounting quarter with the understanding that they would reacquire them a few weeks later. By this means the company was able to hide in the region of $38.6 billion in the fourth quarter of 2007, $49.1 billion in the first quarter of 2008, and $50.3 billion in the second quarter of 2008. This enabled Lehmann Brothers to publish reports that enhanced the company's appearance of solvency.

Lehmann Brothers was able to accomplish this by entering into repurchase agreements with banks in the Cayman Islands. Alan Sharp (2010, March 10) explained the ruse worked this way, imagine you want to buy a car and need a loan. Unfortunately you've maxed out several credit cards. On the day before a loan examiner checks your credit you hide all your credit card liability under a fictitious person's name, hence the examiner believes your credit is good and approves the loan. Once the loan is secured you reassume all your debts.

Companies legitimately move transactions off their balance sheet all the time. If a company moves a transaction off their balance sheet accounting regulations must be followed to explain where the entry was moved and the reason it was moved to investors. But Lehmann Brothers appears to have had dishonest motives for moving transactions off-balance-sheet, to prevent others for scrutinizing their problems.

Banks employ this business practice on a regular basis, and record these off-balance-sheet transactions as loans in their books. At Lehmann Brothers these transactions were entered as sales. The result was, at least on the books, the company presented with more cash assets and less liability. The primary reason for doing this was to make the company's balance sheet look better to investors and more importantly rating agencies. If word of their true financial position became…… [read more]


Fraud Continues to Pervade the Accounting Industry Article Review

Article Review  |  2 pages (625 words)
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Fraud continues to pervade the accounting industry. A study conducted by the Association of Certified Fraud Examiners (2010) found that fraud in terms of losses, schemes, detection methods, and perpetrators of occupational fraud were overall consistent over the course of six studies; with the inclusion of international data, the study also found that international fraud problems plagued non-U.S. companies as well. It is estimated that five percent of annual income is lost to fraud. Keeping Fraud in the Cross Hairs (2010) briefly examines the causes of fraud and the steps that may be implemented in order to prevent fraud.

Though large financial frauds have garnered the most attention in the media and press, these cases only comprise 15% of U.S. financial companies. The remaining 85% of companies yield less that $5 million and are the most vulnerable to occupational fraud. The majority of CPAs are not auditing multi-million dollar companies and are more likely to detect fraudulent schemes in a small business.

Opportunity is one of the key elements of the fraud triangle and is a gateway for fraud. The other two elements of fraud are not clearly defined in the article; the inclusion of the three elements would help to better understand the function of the fraud triangle. Joseph T. Wells (2010) cites that the greatest opportunity for fraud is present in the accounting department where controls are strongly enforced yet does not explicate the controls that are in place, nor the vulnerability and sustainability of said controls. The reason that the accounting department is more likely to commit fraud is because they know what the controls are, how they are enforced, and how to circumvent them.

Asset misappropriations are classified into two categories: cash and other assets. Cash misappropriations comprise approximately 80% of asset misappropriations. Because the accounting department in many firms is responsible for the receipt and disbursement of…… [read more]


Fraud Committed by Worldcom Research Paper

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WorldCom filed for bankruptcy in 2002, after having admitted to committing an accounting fraud worth $3.8 billion. The company had inflated its profits by this amount in an attempt to distort the company's falling stock price. This fraud was committed largely to help CEO Bernard Ebbers cover margin calls on options he had on his shares of the company. After having borrowed from the company to cover these calls, Ebbers needed to reverse the long-term decline in the company's stock (BBC, 2002).

How the Fraud was Committed

According to the SEC's Report of Investigation into the matter, the fraud was committed two different ways. The first was through the reduction of reported line costs. In Q4 2001 and Q1 2002, the company transferred $3.852 billion in line cost expenses to asset accounts. The company also announced line cost accounting irregularities, bringing the total fraud online costs to over $7 billion. The line costs refer to the costs of carrying calls on the phone lines and formed the largest expense for the company. Transferring such costs to assets is essentially a statement that the cost did not occur (that is to say, an asset did not need to be liquidated to meet this cost). The net effect is to understate costs, overstate profits and overstate assets.

The second point of fraud was exaggeration of revenues. This fraud was direct in nature -- the company simply invented revenue entries to bridge the gap between actual revenue and target revenue. The transactions were entirely fictitious. The transactions were typically allocated to "Corporate unallocated" accounts, which were distinct from the accounts of operating divisions. The Operations and Revenue Accounting groups were involved in the fraud, in addition to Ebbers and CFO Scott Sullivan.

How They Were Caught

The company was already raising flags because it had maintained strong revenue growth in the face of a declining telecommunications industry in 2000 and 2001, but the fraud was ultimately detected and revealed by employees inside the company. Internal auditors discovered large transactions that they were unable to account for. The auditors searched through the company's records and uncovered the initial $3.8 billion in fraudulent accounting entries. There were simply no matching records for some of the entries. The auditors overcame roadblocks thrown up by external auditor Arthur Andersen.

The initial red flag came when a division head visited the internal audit department to complain about having a $400 million rainy day fund taken away by the CFO and recorded as profit. This would have caused the division head to take a loss in the next quarter. The $400 fund was set aside in accordance with accounting rules to cover revenue shortfalls that were expected, as was the case. Taking the $400 million away not only increased the book value of the firm but it also reflected on the firm's revenues (Pulliam & Solomon, 2002).

The actions of the internal auditors had come around the same time as the SEC had launched its own investigation into the… [read more]


Kimberly Clark Essay

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Kimberly-Clark operates in four different industries -- personal care, consumer tissue, professional and health care. Each of these industries is similar in that they are oriented towards multinational competition, with firms operating in monopolistic competition, perhaps occasionally facing oligopoly. The company's supply chain, production and distribution are therefore global in nature.

In general, Kimberly-Clark is one of the leading firms in its industries. K-C competes against firms such as Georgia-Pacific, Procter & Gamble and Energizer Holdings in some of its segments. In most industries, there are only two or three major competitors. The industries in which Kimberly-Clark competes are mature industries, characterized by strong competition among a limited number of players. Private labels are increasingly a form of competition. K-C relies on distribution, brand-building and product differentiation through marketing in order to build and maintain market share, and these are the key success drivers for other firms in its industries as well. These industries in general are subject to slow growth, as they are consumer staples. In recent years, demand has declined slightly as the result of the economic downturn, but in general demand tracks economic and population growth in the company's mature markets. Only in rapidly growing emerging markets are there significant prospects for growth.

The industry relies on major retailers for a significant portion of its sales. For example, Kimberly-Clark derives between 13-14% of its sales from Wal-Mart (Kimberly-Clark 2009 Annual Report). Firms in the industry are also dependent on the cost of raw materials such as cellulose fiber and synthetic absorbents, and can be subject to adverse price movements in these commodities. The…… [read more]


Pretend That Two Different Students Answers Essay

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Pretend that two different students answers each of those questions separately, i.e. total four answers (150 words each). For example, student #1 answers first question , student #2 answers first question, etc.

Capital budgeting has three phases: (a) identification of potential projects, (b) selection of investments, and (c) post-audit of investments. What is the accountant's role in each phase? (Chapter 11)

The accountants role in the first phase of capital budgeting, identification of potential projects, is minimal. The goal of this stage is to find a need or opportunity for the company or organization. Typically this takes place as a result of the company's vision and a proposal to senior management is made. This proposal includes the identified opportunity but also includes some possible ways to deal with the issue and recommendations. The second phase of capital budgeting, selection of investments includes gathering information to help in the decision making process. Accountants typically help with the gathering of this information and help to make informed decisions about which potential projects seem to best align with the organization's mission and goals. Post audit investments also known as follow up auditing, allow for active roles on the part of accountants. Accountants function throughout phases two and three as "information specialists" (page 427).

Student 2 Answer:

Accountants do not play much of a role in the first phase of capital budgeting referred to as the identification of potential projects phase. During the other two phases, accountants are in large part responsible for the information that is being processed by the company. Accountants provide companies with detailed cost measurement information in order for the company to make strategic decisions. This takes place during…… [read more]


Big 4, 'Next 4', and Smaller Accounting Article Review

Article Review  |  3 pages (843 words)
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¶ … Big 4, 'Next 4', and Smaller Accounting Firms: Resignations v. Dismissals and the Outcome of the Auditor Change Process" by Dr. Charles P. Cullinan and Dr. Hui Du addresses the issue of auditing services among publicly traded companies. As such, the article begins by noting that there has been a general loss of market share by Big 4 firms, amounting to a decrease of about half, from 44% to 22%. The article examines whether this is the result of accounting firms resigning from clients, or client decisions to change auditors.

Purpose/Goal/Thesis

The purpose of investigating these realignments of auditor-client relationships culminates in the more specific objective of the paper, to examine auditor-client realignments between 2003 and 2008 to determine its nature as driven by auditors or clients. Furthermore, the research is unique in terms of its focus not only upon the Big 4 vs. non-Big 4 paradigm, but also upon a new tier of firms known as the "Next 4." Firms that are neither Big 4 nor Next 4 are referred to as "Smaller Firms."

3) Literature Review

In addition to an extensive literature review, this section of the paper also includes research questions to be examined. The literature review includes various sections, as relevant to the purpose and goal of the article. The authors note for example that the auditor change literature generally recognizes only Big 4 and non-Big 4 auditing firms, while other areas of auditing literature is somewhat more flexible, by examining a three tier market for audit services. Such literature recognizes the differences among auditing firms to warrant the classification of an auditing tier between the Big 4 and Smaller Firms.

In addition to an examination of auditor resignation vs. dismissal, the literature examined also indicate differences in the nature of auditor resignation, where an increased litigation risk makes it more likely for auditors to resign from their clients.

Another important issue is the fact that auditors tend to be dismissed when their fees are perceived as excessively high for the services provided. This generally occurs in the case of Big 4 firms, where clients tend to replace such auditors with lower-tier professionals who charge less for the same service.

4) Methodology

The researchers began their work by obtaining a list of auditor changes for the years to be examined from AuditAnalytics. There is a clear distinction from auditor changes as a result of resignation and as a result of dismissal.

The main variable for the study is the tier of the accounting firm in…… [read more]


Unwise to Make This Investment Thesis

Thesis  |  3 pages (932 words)
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¶ … unwise to make this investment for a wide variety of reasons. The promised return indicates the high level of risk inherent in this investment and this risk is born out in the inadequacy of the financial statements. The statements are simply inadequate in so many ways that they are barely worth considering; yet there is little else beyond the statements upon which for me to make an investment decision.

The first major problem with the financial statements is that they are unaudited. Auditing is a critical procedure in the production of financial statements because it acts as verification of the authenticity of the information (Vitez, 2010). Unaudited statements, especially from new, private companies, are not worth the paper they are printed on. Such statements may or may not contain any factual information. Without auditing, there is simply no way for an investor to know for certain that the statements are even remotely accurate.

Even if the statements were audited, there are a number of problems that would negate any hope of a rational investor purchasing these debentures. The first is that the financial statements are a year old. While it may be fascinating from a historical perspective to study these statements, from an investment perspective a reasonable investor would need more timely and accurate information (Richardson, 2002). This is especially true of younger companies, whose fortunes can change swiftly. But even for established companies, it would be unwise to make an investment decision based on year-old statements.

The third major issue with these statements is that they do not have any comparables. Comparables are one of the keys to understanding financial statements (Robinson, 1975). The firm's bottom line number on its own is relatively meaningless. Context is vital, since the bottom line number may actually indicate that the there has been a significant decline in the firm's fortunes. Without such context, however, it is difficult to make an informed evaluation of the statements presented.

The fourth major issue with these statements is that they contain no disclosures. These disclosures are absolutely critical for the interpretation of financial statements (AICPA, 2010). As with the comparables, the disclosures are a means for putting context to the statements. It is imperative for the proper evaluation of financial statements to understand the nature of the inventory valuation, depreciation methods and loan agreements.

The condition of the financial statements is poor. The time length of the investment, at ten years, represents a long time frame for which some degree of firm stability is required. A promise of 40% is meaningless if the firm cannot afford to pay the interest. Indeed, for a firm in what is in all likelihood a mature industry, it is unrealistic that the Will Turner Corp would have the growth needed to cover the cost…… [read more]


Baker Made Several Mistakes in the Course Research Proposal

Research Proposal  |  1 pages (308 words)
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Baker made several mistakes in the course of his audit. One of those mistakes was discounting the materiality of some of the errors. For example, he decided that the inversion of the numbers in $10,443 and $10,434 was immaterial and did not count this as a deviation. All deviations should be counted, regardless of size. A deviation of this type, for example, could result in a major error depending on which of the numbers are inverted. Defects can be classed according to their seriousness, but all defects must be recorded (Schilling, 1982).

Discovery sampling is not an appropriate method for this type of audit. What discovery sampling is best used for is for situations where one deviation would require an intensive investigation, such as when fraud is suspected (Kaplan, 2003). However, Baker actually used acceptance sampling (albeit incorrectly with his decision to reject the deviation noted above).

Baker automatically increased the sample size to…… [read more]


Enormo: Ultro's Fraud Research Proposal

Research Proposal  |  2 pages (626 words)
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Enormo Case Study: Ultro's Fraud

a.) Discuss the implications of this illegal act by Ultro's management.

Accounting fraud is not limited to simply 'cooking the books,' or actively creating a financial statement that gives a deliberately inaccurate portrait of a company's finances. It also involves failing to report known fraud. In this case, Enormo is attempting to persuade a respected accounting firm to look the other way regarding its subsidiary Ultro's illegal activities, with the defense that such activities will not materially affect its own financial status, other than Ultro perhaps incurring a small fine.

However, if the fraud is discovered, the fate of both Enormo and its subsidiary Ultro could suffer a severe blow, in terms of public relations, as well as legal repercussions. First of all, Enormo's legal analysis is far from expert, and is highly biased: what will actually transpire when the fraud is revealed remains an unknown quantity. If a scandal erupts in today's anti-business environment, this could severely jeopardize the Enormo's financial health. An accounting firm has a legal and ethical responsibility to fully disclose all of a firm's financial activities that could have an impact upon its financial future.

A firm's reputation, as known as its 'goodwill' is an intangible accounting asset that is still reckoned on a financial balance sheet. No accounting firm can accurately calculate Enormo's assets in terms of 'goodwill,' knowing that the firm may soon become part of a scandal. The damage to Enormo's goodwill if it is embroiled in scandal is likely to be far greater in today's current media environment, than it would have been in the past. And so will the damage to the accounting firm's own reputation, if it is complicit in what will be portrayed as blatant fraud.

b.) Describe the courses of action that are available to your CPA firm regarding this matter.

The firm has acted…… [read more]


CPA Versus MBA Thesis

Thesis  |  8 pages (2,170 words)
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CPA v MBA

Annotated Bibliography

Aier, J.K. Comprix, J. Gunlock, M.T. And Lee D. (2005) the Financial Expertise of CFOs and Accounting Restatements. Accounting Horizons. 19 (3 )123 -- 135

Aier et al. (2005) focus on the impact of education on the manner in which Chief financial officers carry out their job duties. More specifically the article focuses on the… [read more]


Contracted for Herein Shall Consist Research Proposal

Research Proposal  |  2 pages (427 words)
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¶ … contracted for herein shall consist of the auditing of the company's financial records, ascertaining the location of any discrepancies and bringing them to the attention of project leaders. Careful analysis of transactions, profits, and expenditures will take place on site, using the paper files and computer software already in place with the company.

Location of Work

The work, including all private endeavors and group meetings, shall take pace at the company's central office with the equipment and information provided there for the express purpose of this work. No materials, equipment, or information is to be removed or transmitted away from this office for any purpose, nor is this work to be conducted off site.

Period of Performance

The work shall last no longer than three weeks, with forty hours of work taking place in each of the first two weeks and possibly longer hours in the third week, if necessary and as needed. The project must not take any longer than three calendar weeks.

Deliverable Schedule

Updates regarding completed files and departments will take place on a daily basis. Significant progress will be expected daily as determined by project leaders, with goals for subsequent days set at the prior day's meeting. Consistent progress is necessary to keep to the specified time…… [read more]


IFRS vs. GAAP Impairment Loss Thesis

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Accounting Resources

In any industry, it is important to keep up-to-date with the ongoing changes in other firms, consumer trends, and other factors that affect the way business in the industry is conducted. In few sectors is this more apparent currently than in the field of accounting, where the recent spate of bank failures and other company collapses brought on… [read more]


Fair Values in Financial Reporting Essay

Essay  |  3 pages (875 words)
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¶ … Value Accounting

The Effects of Fair Value Accounting on Financial Statement Reliability and Considerations in the Current Credit Crisis

Regulatory legislation defining and mandating fair accounting practices in all publicly traded companies and most financial institutions was developed in the wake of the Enron scandal and took full effect in 200&, less than a year before the onset of the credit crisis and the general economic collapse that led to the current (or recently ended, depending on who you ask) recession (AICPA 2009; Moyer 2008). Many analysts blame the downturn in part on the accounting methods required by the fair value accounting standards and the enormous write-off that major banks suffered in the lead up to and during the credit crisis. Specifically, claims have been made that fair value accounting leads to a pessimistically low and unreasonably low valuation that does not take exiting capital and management skills into consideration, thus letting fear rule over objectivity (Moyer 2008).

The two issues of financial statement and valuation estimate reliability when fair value methods are used and the role that fair value accounting methods played in the development of the credit crisis are quite interconnected, with the former being an alleged primary cause of the latter. This argument can be understood in two ways: first and foremost, it is contended that fair value accounting practices lead to undervaluation and in the current crisis the paper loss of increasing amounts of wealth, which eroded confidence and thus dried up credit markets, which becomes a self-exacerbating problem (Moyer 2007). On the other hand, it could also be claimed that fair value accounting methods simply aren't effective at determining real value in a useful way any more so than other practices.

This second options is perhaps the more plausible of the two, as there was certainly some indication in the current credit crisis that estimates -- even good-faith estimates -- of the value of certain securities, other assets, and entire institutions were grossly misrepresentative (AICAP 2009). There is also little doubt that the fair value accounting methods have led to an increase in market volatility, although more time is needed to determine whether this is a temporary circumstance based on the novelty of the accounting methods prior to the downturn, or if the observed trend of increased market volatility will be a long-term effect of fair value accounting methods (AICAP 2009; Moyer 2008).

This latter state of affairs seems likely, as the use of fair value accounting practices means that values must be continually adjusted based on existing market fluctuations (AICAP 2009). As changes in value necessarily have an effect…… [read more]


Internal Controls Essay

Essay  |  2 pages (664 words)
Bibliography Sources: 3

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Internal Controls

SOX and Corporate Governance

The Sarbanes-Oxley Act of 2002 (SOX), is a law enacted as a direct result of corporate scandals such as Tyco International, Adelphia, WorldCom and Enron. The reason that SOX is an important tool to avoid further scandals is that it creates the Public Company Accounting Oversights Board to register and regulate all public accounting firms, as well as requiring that the CEO of a corporation, along with its chief financial officers certify that all financial statements are accurate -- this to keep the CEO from trying to disavow any knowledge of wrongdoing as occurred in several of these scandals (OSU, n.d., para. 2,5). SOX also takes several steps to prohibit certain activities by corporate executives and provides whistle blower protection as well as establishing criminal penalties for actions taken by the corporation against them.

In summary, SOX addresses almost all of the criminal offenses that were committed in the corporate scandals both by the corporation itself and the accounting firms who committed offenses in their auditing of the firms. On the other hand, Wallace (2007) reports the jury is still out on its affectivity but that there are indications of its sufficiency along with other legislation to "power incremental change" and to restore the public confidence in corporate governance.

IFRS

International Financial Reporting Standards has established a "framework" by which corporate financial statements must provide understandable, relevant, reliable, and accurate statements to its shareholders of the corporate financial position. More than 100 countries have adopted the new accounting standards incorporated into IFRS. However, it is only now being implemented by a small number of companies, and is not mandatory until 2014 for large public companies. The indications, as with SOX, are positive towards increasing investor transparency into the financial operations of these corporations.

Internal Audit

This basic function of a corporation assessing its own internal control systems and identifying and correcting deficiencies has been strengthened through some of the processes and legislation we have already discussed.…… [read more]


Cash Flow Rather Than Accruals Accounting Essay

Essay  |  3 pages (998 words)
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¶ … reverted to cash flow rather than accruals accounting, in order to measure financial performance, the need to restore confidence in the financial reporting profession would disappear - and along with it much of the controversy over achieving one set of globally accepted accounting standards."

In the United States, there are two generally permissible methods of keeping track of business income and expenses: the cash flow accounting method and the accrual accounting method. Businesses that have sales of less than $5 million per year are free to choose which accounting method to adopt unless they stock an inventory of items that are sold to the public, in which case they are required to use the accrual accounting method by the IRS ("Cash vs. accrual accounting," INC, 2000). In theory, the cash and accrual methods differ only in the timing of when sales and purchases are credited or debited to the business' accounts. In the cash method, income is recorded when 'cash' (or however the payment is made) is actually received by the business. Expenses are deducted from the business' ledger when the funds are actually paid. But under the more common accrual method, transactions are recorded, and the actual cash addition or deduction may take place in the near or far future.

The accrual method is deemed easier for businesses, as with some transactions, it can be difficult to determine when the actual exchange of funds occurs, particularly if the actual monetary transaction involves a complicated exchange ("Cash vs. accrual accounting," INC, 2000). But for most organizations, the main significance of the mandated or chosen use of one method over another is for tax purposes. Expenses incurred during one tax year cannot be deducted until they are paid using the cash method, but in the accrual method once the transaction occurs, it is recorded as a deduction for that year's tax statement: "You don't have to wait until you see the money or until you actually pay money out of your checking account," to take the deduction in the accrual method, so an organization does not have to wait until it is actually cash-poorer to record a potentially deductible expense ("Cash vs. accrual accounting," INC, 2000).

The advantage of the cash method is that it gives a truer idea of how much actual cash a business has on hand. Furthermore, it lessens the ambiguity as to whether the actual payment will be made to the business -- only when the cash enters or leaves the account can the expense be recorded. What if someone does not pay for the item, for example, even though the actual transaction is recorded, as in the accrual method? This ambiguity is done away with in the cash method, as well lessens the risks of other methods of creative accounting, such as creating fictional future profits or expenses.

The IASB (International Accounting Standards Board) mandates cash flow methods and in fact, studies of the adoption of the IASB standard suggest it increases accounting…… [read more]


Johnson, Sarah. , April 4). "Goodbye GAAP Article Review

Article Review  |  3 pages (909 words)
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¶ … Johnson, Sarah. (2008, April 4). "Goodbye GAAP." CIO Magazine. Retrieved September 3,

2009 at http://www.cfo.com/article.cfm/10919122/c

Generally Accepted Accounting Principles (GAAP) has long been the 'gold standard' of accounting guidelines and ethics within the United States. It is sometimes easy to forget that not all nations abide by GAAP. The European Union, for example, has abandoned local standards and mandates that all companies comply with International Financial Reporting Standards (IFRS) instead. This is not simply to confirm the interconnected and seamless economy of the EU, but as a way of facilitating globalization as a whole for European firms. The new era of interconnected economies means that there must be more uniform standards regarding accounting principles. More and more accountants are now advocating that the U.S. And all other major developed nations should also adopt IFRS as a way of facilitating transparency and ease of reading and reporting financial statements.

Both auditing firms and multinational companies have been pressuring the U.S. Securities and Exchange Commission (SEC) to create a homogenous, global standard for all U.S. publically-traded companies. Since 2007, the SEC has allowed foreign companies to submit statements that observe IFRS without reconciling the differences between IFRS and GAAP reporting. That has effectively prioritized IFRS, according to the 2008 article "Goodbye GAAP" by Sarah Johnson of CFO Magazine and will toll the death knell of GAAP altogether within the next five years.

Theoretically, the efforts of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have been working to merge U.S. accounting rules with international financial reporting standards (IFRS). But most believe "it's not a question of if but when" GAAP is eliminated, through this process (Johnson 2008, p.1). And some large U.S. multinationals are not sorry at the prospect, complaining: "It's really not cost efficient to maintain two sets of books on different standards," of GAAP and IRFS, one for the U.S. And one for everywhere else (Johnson 2008, p. 1). But other companies have their reservations, given they prefer GAAP's specificity and rigor, in contrast to IFRS' vaguer guidelines.

According to most objective assessments, GAAP is far more detailed, which was why some accountants hoped that those regulators responsible for creating a convergence between the two systems "would take the best aspects of GAAP and IFRS to create the highest-quality standards possible -- no matter how long it took" (Johnson 2008, p.3). Yet the U.S. GAAP system is seen as too detailed by Europeans who prefer their more vague and flexible guidelines. "We do have the best reporting system, but the rest of the world will not accept it...It's too detailed for them" said one U.S. accountant (Johnson 2008, p.3). And European critics of the U.S. system note…… [read more]


Certified Public Accounting Thesis

Thesis  |  8 pages (2,357 words)
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Certified Public Accounting

The job of a certified public accountant is one that not everyone would enjoy and one that not everyone can do. Working with numbers can be a difficult job at best, and the people who do it sometimes struggle with ethical dilemmas. Others who remain completely ethical and unconflicted find that they are occasionally outcast from companies… [read more]


Just in Time Essay

Essay  |  2 pages (660 words)
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JIT

Just in Time

'To gain a competitive edge, many organizations in the high tech sector now focus on quality and cycle time by employing JIT (Just in Time). As a result, a traditional accounting system may not be appropriate. They now have to focus on the value of controlling non-financial performance as a key to improving productivity (delivery).' Discuss, using actual situations in your organization, or others that you are familiar with, to illustrate how quality, cycle time and productivity are related.

Traditional methods of cost accounting and cost reduction focus on reducing costs, either by slashing input costs such as labor and shipping or finding cheaper input raw maters. However, Just in Time (JIT) manufacturing focuses on making production processes more efficient, reducing inventories to only what is needed, and continually improving quality. It was originally developed by the Toyota Corporation, and is frequently cited as a key part of that organization's domination of the world automotive market. Although the principles of JIT are usually only applied to fairly simple rote processes, they have proved uniquely successful in organizing those rote processes to produce highly sophisticated machinery.

"Waste results from any activity that adds cost without adding value, such as the unnecessary moving of materials, the accumulation of excess inventory, or the use of faulty production methods that create products requiring subsequent rework" (Ashland 2006). Creating a uniform flow of activity ensures that no part of the production process gets 'backed up,' and makes the need for a part clog the flow of 'traffic' through the plant. JIT workplaces are highly coordinated. To create such a flow, work stations should be as close together as possible, and workers must have a diversity of skills so they can be easily switched from one station to another. Workers must never remain idle -- instead, the workers should be shifted to maintaining the equipment and to brainstorming ways of improving other activities at the firm. However, although much is demanded of…… [read more]


Financial Accounting Standards Board (FASB) Issued Statement Thesis

Thesis  |  5 pages (1,437 words)
Bibliography Sources: 4

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¶ … Financial Accounting Standards Board (FASB) issued statement number 157 in response to the lack of clarity regarding fair value under the generally accepted accounting principles (GAAP). The guidance that was given was incomplete, vague and was not centrally located. This made the issue of determining fair value under GAAP difficult and inconsistent. Given that the objective of GAAP… [read more]


Global Business Community Thesis

Thesis  |  3 pages (748 words)
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International Accounting Standards

Why the Global Business Community Should Formally Recognize the International Accounting Standards Board as the Primary Rule Making Body

Today's business world is increasingly globalized. With this in mind, the International Accounting Standards Board was created. However, not all organizations have adopted the standards set forth. This paper will explore the reasons why the global business community should formally recognize the International Accounting Standards Board as the primary rule making body.

International Accounting Standards Board Overview:

The International Accounting Standards Board (IASB) was created in 2001. Their mission "is to develop, in the public interest, a single set of high quality, understandable and international financial reporting standards (IFRSs) for general purpose financial statements" ("About Us"). Their goal is "to provide the world's integrating capital markets with a common language for financial reporting" ("Who We Are").

The IASB is an independent standard setting board. It is appointed and overseen by a professionally and geographically diverse group of trustees who are held accountable to capital market authorities, as well as the public interest. The IASB is supported by an outside standards advisory council as well as an interpretations committee. These bodies offer guidance to the IASB when divergence in practice happens. More than 100 countries either require or permit the use of IFRSs ("Who We Are").

Why the IASB Should be the Primary Rule Making Body:

For decades, organizations have experienced increasing worldwide competition, according to Gebhardt. As such, many have responded with their own strategies of globalization. Today, many companies now conduct business globally or at the least interact with other globalized organizations. Globalization strategies go beyond simply operating globally and include investing and financing. Accounting information plays a critical role in these strategies.

As Gebhardt noted, "For globalizing companies, accounting reports are a vital means of internal communication between managers and employees from different national backgrounds. Even though the core concepts of accounting are not very different internationally, differences in rules and in the application of those rules hamper internal communication." Accounting reports also can serve as a means of external communication. Again, although the core concepts are the same, the differences in rules can lead to miscommunication. As an example, SFAS 34.8 states that borrowing costs require capitalization; however, EU…… [read more]


Financial Statements Part I.A. the Generally Accepted Research Proposal

Research Proposal  |  3 pages (911 words)
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Financial Statements

Part I.A. The Generally Accepted Accounting Principles (GAAP) refer to the standards used in the production and audit of financial accounting statements. There are variations of the standards that are applied to government entities as well as publicly traded entities. Private corporations do not need to adhere to GAAP as they are not required to answer to public shareholders and securities regulators.

The GAAP is the predominant standard in the U.S., and runs in parallel to the global International Financial Reporting Standard. GAAP was developed to provide consistency to financial statements, allowing for ease of interpretation by investors, regulators and financial analysts alike. The standards outline who financial statements must be prepared and presented.

The Financial Accounting Standards Board is responsible for writing and implementing the GAAP. They are guided by the Securities Exchange Commission (SEC). The FASB issues a variety of interpretations, standards, concepts and technical bulletins. These proclamations are used by accountants and auditors to help create the statements.

B. One of the most important measures of a company's health it its liquidity. Liquidity refers to a corporation's ability to meet its short-term debt and interest obligations. Thus, when analyzing financial statements, it is critical to study liquidity ratios. These ratios relate to various current asset accounts in relation to the amount of current liabilities.

Understanding a firm's liquidity is crucial. Many financial measures relate to overall firm performance, or long-term capital structure. But it is liquidity that is important to the immediate survival of the firm. For example, when WorldCom declared bankruptcy, they had assets far in excess of liabilities. But their liquidity was poor -- they had substantial pending debt obligations and no means by which to cover those. Thus, liquidity is an essential component of any financial statement analysis. Therefore, accountants need to pay particular attention to the liquidity figures of their company in order to ensure its immediate survival.

Part II. With respect to Kraft, the income statement is just as useful if not more than the statement of operating cash flows. Kraft has few non-cash items on its income statement. The depreciation is minimal compared with the revenues. Overall, the trends for operating cash flows and net income share similar trajectories. Given that, the income statement is more useful, because that is the statement that is used for taxation purposes and is used as the benchmark against which the firms financial performance and stock price is measured.

For Unilever, cash from operating activities is the more useful of the two. What we see is that net income has increased steadily over the past five years. Yet, the cash flow from operating activities has decreased steadily over that period. Part of this can be attributed to declines…… [read more]


Preparation of Financial Statements Thesis

Thesis  |  6 pages (1,731 words)
Bibliography Sources: 1+

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Finance

Changes in Financial Reporting after Accounting Disasters

If the twentieth century has been the century of globalization and international expansion, the twenty-first century emerged as a time of financial troubles. The ability to expand the businesses internationally has led to the creation of billion dollar turnovers. With increasing pressures to register high levels of profit, increase shareholder value and… [read more]


Personal Goal Statement Research Proposal

Research Proposal  |  1 pages (345 words)
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Personal Goal Statement

On a general note, the ultimate goal of the university is to create highly skilled and capable members of the community, which are able to become successfully integrated within the society, from all political, social, economic or technological standpoints. These individuals will be able to make a positive difference in their fields of expertise, contributing to improving the working conditions for the staff members, creating highly specialized and customized marketing campaigns that sustain large corporations in reaching their final objectives. Becoming such an individual is my personal goal. But to achieve this however, I will need the support of your university.

For the immediate future, I plan to complete the MBA program I am currently attending. It will also focus on one year primarily centred on the thorough study of accounting through the distance learning program implemented by your university. Throughout this period, I intend to remain a full time employee within the governmental institution. Once the MBA is completed, I desire to continue to work for the government,…… [read more]


Management the Project Audit System Term Paper

Term Paper  |  2 pages (576 words)
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Management

The project audit system is a more in-depth analytical tool than the performance management system in chapter 13. That system measured performance of a project but did not take into account bigger picture issues. The project audit system lays out an understanding of why the project was taken in the first place, and then evaluates not just the performance of the project but also the project's continued role in the organization. This is weighed against the organization's broader objectives. They also analyze the project team, the organizational culture and provide a review of both internal and external performance factors to help determine the ongoing viability of the project.

It is difficult to perform an audit in a truly independent, objective fashion because individuals involved may have made an emotional investment in the project. This can be in terms of time, or political considerations (being the person who authorized the project, or being someone in charge of an aspect of the project, for example). For this reason, an audit should be conducted by personnel that is completely independent of the project. If the project is important enough to the company, that may involved hiring an audit team from outside.

5) This statement is patently absurd. Money that has already been invested is gone - you cannot get it back. Therefore, the only money that is on the table is that which will be spent in future. If the project is no longer viable, spending this money will be a poor investment decision. Money spent in the past should have no bearing on present or future investment decisions. Just because a project is nearing completion does not mean it necessarily makes sense to continue with it.

Chapter 15: 1)…… [read more]


Career Goals and the Role You See Application Essay

Application Essay  |  1 pages (356 words)
Bibliography Sources: 1

SAMPLE TEXT:

¶ … career goals and the role you see for this degree in reaching those goals.

More and more individuals and organizations are turning to accountants for advice and aid to deal with an increasingly complex regulatory system surrounding the field of accounting and financial services. For the past few years, I have worked for an accounting firm and had the great privilege of being exposed to a wide range of the many facets of this ever-expanding, challenging, yet fascinating field. I knew from my own anecdotal experience that the demand for accountants with master's degrees had increased, and later found that my impressions were born out in the most recent AICPA (American Institute of Certified Public Accountants) study, which reported that in 2004 there was a 13% increase in the number of new accounting graduates hired by public accounting firms with Bachelor's degrees, while there was a 33% increase of graduates hired by the same firms possessing a Master's degree in accounting

Marquette University's comprehensive accounting curriculum is impressive in its breadth and depth, and would give…… [read more]


GAAS Standards vs. GAGAS Term Paper

Term Paper  |  3 pages (1,161 words)
Bibliography Sources: 1+

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GAAS standards vs. GAGAS standards

Historically, accounting is concerned with the recording of financial transactions of an organization in the books of accounts. The process of accounting usually ends in a financial statement or a report. Moreover, non-financial reporting methods are becoming more usual. Akin to audit, accounting methods vary among the public as well as private sectors. The methods of accounting are being adopted to be used in both the public as well as private sectors. These different methods establish the manner in which income and expenditure is recorded, and the juncture that particular information is recorded. They also supply different type of information on capital, assets and liabilities, and also budget. (White; Hollingsworth, 26)

Generally Accepted Auditing Standards -- GAAS is a collection of organized guiding principles that is used by Auditors while undertaking audits on companies, finances, guaranteeing the correctness, reliability and verifiability of auditors' actions and reports. It is through the reliance of GAAS, that the auditors are able to minimize the probability of missing material information. The GAAS is segmented into principal sections which are (i) general standards (ii) standards of fieldwork (iii) standards of reporting. (Generally Accepted Auditing Standards)

The GAO issues the Generally Accepted Government Auditing Standards -- GAGAS having the standards with regard to audits with regard to the governmental institutions, activities, programs, as well as roles, and also of government support obtained by non-profit establishments, contractors, and other non-governmental institutions. These standards relate with regard to the professional qualification of the auditors, the audit activity quality, and the features of useful professional audit reports. (Accounting an Auditing Standards)

It is observed that Accountants visualize themselves discharging tasks as a routine manner in an environment that is regulated by an intricate set of rules, principles, and practices. While performing their tasks they are given to assume a certain role. While performing their roles, accountants encounter official or legal rules of behavior as also moral elements created by specific circumstances. It is through acceptance of roles that accountants accept concurrently the consequential obligations. The rules assumes the presence of moral standards which impact the welfare of human being are not established or changed by decisions of authoritative bodies and are proposed to prevail over self-interest and are founded on impartial considerations. (Riahi-Belkaoui, 72)

On deciding upon the appropriate auditing standards, it is a fact that while GAAS are normally used for private as well as public sector audits, the government entity might be applicable for 'federal regulations, state statutes, grant terms, or the Single Audit Act' and therefore might be necessary to use the GAGAS which are used by the Comptroller General of the United States. GAGAS include GAAS, but also entail more auditor responsibilities, inclusive of specific reporting with regard to control within and adherence with the relevant rules and laws. It will be needed to establish and be specific regarding the correct standards for the auditor to observe. (RFP Guide: The Georgia Deptt of Audit & Accounts)

As regards internal control,… [read more]


Sarbanes-Oxley Act Prior to the Enactment Term Paper

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Sarbanes-Oxley Act

Prior to the enactment of the Sarbanes-Oxley Act (SOX) several large corporate accounting scandals had plagued corporate America. Of these, the most publicized were Enron, WorldCom and Tyco. These events rocked the financial world to the core, shaking investor confidence, and highlighting several significant problems in the accounting industry. In response, SOX was created to put tighter controls on public corporations, with the creation of the Public Company Accounting Oversight Board (PCAOB) and covering issues including: corporate governance, auditor independence, internal controls, and enhanced financial disclosure.

The Events Leading up to Sarbanes-Oxley:

The Enron Corporation scandal revealed fraudulent accounting procedures that caused the company's stock to plummet and forced the company into bankruptcy. The fallout from this negatively affected everyone from employees to investors to the investment world in general, as confidence in corporate America was damaged.

Yet, as Lucci notes, the damage didn't just end with Enron. "Financial scandals involving WorldCom, Qwest, Global Crossing, Tyco, and Enron ultimately cost shareholders $460 billion."

Because of these scandals, companies were forced to change the way they did business, to restore investor confidence. Organizations found themselves spending additional money on annual financial reviews, as opposed to the previous trend of keeping audit costs low.

Companies desperate to prove their financial worth and integrity began to go beyond the new legal requirements and set internal control standards more stringent than ever before (Lucci).

The accounting profession, as a whole, had suffered a blow to their credibility. With leading auditing firms, like Arthur Andersen, coming to their end thanks to their part in the Enron scandal, it cast a black cloud over the entire industry (Lucci).

With investor trust in corporations at a significant low, and the industry charged with financial reporting, an investor watchdog of sorts, under question, something had to be done.

Congress responded with the enactment of SOX, in 2002.

As Lucci states, SOX "has been called 'the most significant legislation governing U.S. securities markets since the 1930s'." In an uncommon feat of congressional agility, SOX became law a short seven months after Enron's filing for bankruptcy.

Introduced into Congress in July 2002, it was signed into law by the President by the end of the same month.

SOX Overview:

SOX was created to "crack (...) down on all the Enron - WorldCom - Global Crossing chicanery" (qtd. Lucci) and set stiff criminal penalties for violators of its provisions.

Although created to restore investor confidence, SOX also but corporate executives on notice. Penalties for violating SOX include: lengthy prison sentences and significant fines, if there are discrepancies found in their financial records, indicating fraud, following certification ("H.R. 3763").

There were many significant regulatory changes, with the enactment of SOX, for public corporations operating in America. With its passing, SOX now sets corporate governance as partially a function of federal legislation, removing it from the province of state legislatures.

In addition, Lucci surmises that SOX also greatly impacted the accounting and legal professions. Prior to SOX, the accounting profession enjoyed… [read more]


GAAP Was Authored by Two Professors Term Paper

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¶ … GAAP was authored by two professors of accounting. Craig D. Shoulders, Ph.D., is a professor of accounting at the University of North Carolina at Pembroke and head of the Accounting technology Department at that university. Robert J. Freeman, CPA, Ph.D., is the distinguished professor of accounting at Texas Tech University. Dr. Freeman served on the Accounting Standards Board (GASB) from 1990-2000, and served as Vice Chairman during 1998-2000 and has published several books with Dr. Shoulders previous to the article of interest.

Statement of purpose: The authors have extensive experience with the hierarchy of Government Accounting Standards Board (GASB) with Dr. Freeman serving on its board earlier in his career. The intent of the article is to first define the hierarchy of GASB statements and their priority relative to Federal Accounting Standards Board (FASB), the prioritization of GASB technical bulletins specifically detailing industry audit and accounting guides, and also defining the AICPA AcSec practice bulletins after they have been approved by the GASB board. As Dr. Freeman is an author of Implementation Guides previously, there in significant coverage of the development, structured, precedence of, and role of these in the context of defining auditing guidelines.

The authors also provide insights into why Implementation Guides are subordinate to GASB statements and technical bulletins, and successfully provide frameworks for allowing audits to interpret the guides, statements and bulletins in the context of interpreting financial statements. The authors also make the point several times throughout the article that accountants, audits and financial professionals have the responsibility to stay current on the differences that arise between each of guides,…… [read more]


Expense? Mr. Blowhard's Scheme Significantly but Inaccurately Term Paper

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¶ … expense?

Mr. Blowhard's scheme significantly but inaccurately increases the amount of income the company would report, as it gives the company additional depreciation deductions. Each dollar of line cost reduces net income by a dollar. Generally accepted accounting principles require operating costs like line use to be expensed as they are incurred each year. Mr. Blowhard simply has bought the lines and kept them open for future customer use. He has instructed the fictional line depreciation expenses of the unused lines to be capitalized and accounted for as if they are currently depreciating, like a used line. An analogy might be accounting for the depreciation of a company car that is not used and is merely left fallow in a garage, even though the deductions that are taken by the accountant for wear and tear are comparable with those for a heavily used car.

As defined by Donald Cressey, the rationalization involved on the part of Mr. Blowhard is that he is about to retire, and wants to rapidly increase the public perception of company value in the short-term. Presumably he…… [read more]


California's Health Care Businesses Term Paper

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Professional Ethics of Auditing

In the case at hand, Gilbert is guilty of violating several different ethical obligations that apply to auditors per the Code of Ethics applicable to the profession. Four of these ethical violations include: failure to disclose as required by law, entering into the partnership, the fee arrangement and failure to maintain his clients confidentiality expectations.

An auditor is required to disclose of any information that they know they are required to disclose by law. In the case at hand, Gilbert was made aware that one of his clients, Grandtime Company, had a building that was carrying a significant and undisclosed lien. As an auditor, Gilbert is required by law to disclose this lien by reporting it. His failure to do so is in violation of the Code of Ethics.

Gilbert's business partnership with Bradley, a Chartered Property Casualty Underwriter, is an unethical business formation. The reason why this business set up is unethical is that working with…… [read more]


Slew of Accounting Scandals Including Enron Term Paper

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¶ … slew of accounting scandals including Enron can be attributed to a loss of moral reasoning and professional moral judgment. As with any profession, accountants should be held to rigorous moral standards of conduct. Accounting advice and decisions are taken seriously by the companies they serve and therefore those decisions should be made with as sound and just a moral reasoning as possible. Higher education is the primary means by which accountants formulate their professional ethical codes of conduct and therefore ethics should be a fundamental feature of the professional accounting training curriculum. However, students in accounting programs score lower than their counterparts in other professional courses on moral aptitude tests such as the Ethical Dilemma Instrument (EDI).

The Transcendaental Meditation (TM) method is proposed as a means to teach moral reasoning to accounting students without requiring any change in course curricular content. Students in China will be taught the TM procedure, which requires a twenty-minute meditation twice…… [read more]


Accounting Maryville Online Company Trial Balance Debit Term Paper

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Accounting

Maryville Online Company

Trial Balance

Debit

Credit

Cash

Accounts Receivable

Equipment

Accounts Payable

K. Jacobson, Capital

K. Jacobson, Withdrawal

Service Fees

Salaries Expense

Rent Expense trial balance is a list of a business entity's accounts with their ledger balances. The purpose of preparing a trial balance is to test the accuracy of the journalizing and posting process. The account titles are arranged according to the Assets, Liabilities, Owner's Equity, Revenue and Expenses and only accounts with balances appear in the trial balance. The accounts should be in their normal balances, Assets, Withdrawals and Expenses under the Debit side and Liabilities, Capital and Revenues under the Credit side. The total amount under the debit column should be equal with the total amount under the credit column. A difference would signify an error has occurred either in the journalizing or posting process.

One of the qualitative characteristics of financial statement reports is Reliability. Reliability pertains to the degree of confidence the users have on the financial statements because they represent faithfully the economic substance of the transactions. Simply stated, that the figures as represented in the reports is not misstated or manipulated. In order to secure that the accounts represent what they are suppose to be, adjusting entries are made as part of the accounting cycle of a business entity. Adjusting entries are those made in order to update the accounts to their proper balances and ensure their accuracy as of the date of the report. Generally, it is the timing issues of a particular account that needs to be adjusted in order to conform to its appropriate accounting period. The adjusting entries depend on the nature of the account to be adjusted, whether the account is an asset, liability, capital, revenue or expense.

Absence of these adjustments, the financial report for a particular period is misstated and may not lead to an informed judgment to its users for effective decision making.

Adjusting entries are made along with the worksheet which aids in the preparation of the financial statements.

In analyzing the account transactions to make the necessary adjustments, the Revenue and Expense Recognition Principles or otherwise called the Accrual Basis of Accounting is considered. Under this principle, it is recognized that some of the ledger accounts does not reflect the accurate amounts and should be adjusted because some income earned or expenses incurred have not yet been recorded in the books of accounts, included in the accountant's book are some income which are not yet earned or some expenses which are not yet expired, some assets included in the books of accounts should already be expired or used up, or some advances from customers or clients included in the books of accounts are already earned. Various users use the financial statements to judge the financial position and operating performance of the business therefore it is important that the financial statements be properly prepared in a manner as to reflect the substantial transactions pertaining to the particular reporting period.

Accrued income… [read more]


Certification Exams Term Paper

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Certified Public Accountant (CPA)

Accountants have different designations based on their areas of expertise. The most widely recognized credential is the certified public accountant (CPA), the only individual permitted to sign an audit opinion that attests to the fairness of financial information. Two lesser known credentials that have wide acceptance are the certified management accountant (CMA) and the certified internal auditor the (CIA). Each of these professional designations assess the candidates' skills and abilities in areas important to an organization. The CMA designation puts more stress on management areas and internal decision-making abilities than the CPA designation. The CIA designation focuses on the understanding and skills required to analyze, evaluate and improve the organization's internal management processes. It is necessary to take an examination for these designations.

The CPA exam requirements vary from one jurisdiction to another. The requirements of a particular jurisdiction can be found on the Board of Accountancy website (NASBA) for example, in Ohio the criteria is a BA degree with 150 semester hours of college credit or a BA associates degree and a score of 1200 on the verbal and quantitative sections of the Graduate Record Examination General Test; 30 semester hours in accounting (or 24 semester hours in accounting, excluding principles) with coverage in auditing, financial accounting, management accounting, professional ethics, and taxation; 24 semester hours in business courses other than accounting courses. Economics and information systems count as business subjects. In Florida, the requirements are: A BA from an accredited institution, not necessarily tin accounting;

30 semester hours of coursework from an accredited institution, beyond what was required for the BA -- if it required 120 semester hours, then the total hour requirement is 150 semester hours; There is no requirement that the 30…… [read more]


Government vs. Private Sector Discussion and Results Chapter

Discussion and Results Chapter  |  2 pages (616 words)
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¶ … Government and private sector accounting and finance

There are various differences between public and private processes of accounting and finance. This is because the government works on accountably managing the public money and interests and has not only capital in mind but other projects too, whilst the private sector focuses on managing its particular business for profit. The nature of public goods and the fact of taxation also give rise to different methods and different elements in the variables of economics and finance.

Diffences include the fact that the private sector accounting is done on an accrual basis, whilst that of the public sector is conducted via cash basis

The accrual basis reports income when earned and expenses when incurred, as opposed to the cash basis of accounting, which reports income when received, and expenses when paid. In other words, accrual accounting recognizes expenses and liabilities when costs are incurred and when measurable commitments are made, not just when checks are written or funds are borrowed.

The accrual basis provides a better measurement of an organization's current economic status since the key difference between the accrual and cash measurements is the annual change in liability. Expenses are accrued annually, and those that are not repaid are reflected as the organization's liability or accrued expenses. The cash budget deficit recognizes current deficits / expenses, whereas the accrual deficit recognizes those made over a period of time. The organization accrues expenses over a period of time and may have an accumulated backlog of expense. It is to this effect, that the accrual basis of accounting is a better measure of an organization's current economic status than is the cash basis of accounting.

2. The public sector account works according to fixed assets treated expense, whilst the private sector accounts works according to fixed assets otherwise known as capital…… [read more]


Accounting Standards in Use Term Paper

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S. To also converge to these standards if the United States intends to work with other nations in developing one common accounting and reporting language. Hence in one way or another convergence to a single set of accounting standards is a necessary response to economic globalization. This is why the U.S. Securities and Exchange commission has already taken steps towards the adoption of the IFRS standards. The Security and exchange commission has now allowed the foreign companies the latitude of submitting their financial statements consistent with the IFRS framework without having to convert them first to the U.S. Generally Accepted Accounting Principles (GAAP). To further accelerate the process of convergence that U.S. security and exchange commission released a statement in February 2010, in which it was maintained that the SEC encourages the convergence of the U.S. Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS) so that the differences and the inconsistence between the two set of standards can be minimized and abolished. Hence IFRS is being rapidly adopted by nations and thus ensuring acceleration towards a uniform set of accounting practices and standards globally. This will broaden the cross broader competitiveness of U.S. capital markets and help achieve a greater global comparability of the accounting information not only in the U.S. But all over the globe. Although necessary, but it is also important to mention that this process will take time as there are various legal and economic complexities surrounding the issue for example many economists and investors are concerned about transferring the standard setting responsibility outside the United States. Also the current regulatory, statutory and economic matters are hindering the adaptation of the IFRS framework. However, moving to a universal accounting language has become a natural necessity now and is indeed a necessary response to the globalization of business, finance, and investment and hence once adopted it will definitely reduce the unnecessary complexity that exists with multiple reporting languages.… [read more]


Hair Emporium Case Study

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Another benefit of having a standardized accounting system is that the franchisees can learn from each other how to handle given situations. The combined body of knowledge will improve performance throughout the organization. Lastly, a standardized, computerized accounting system allows the owners to spend more time working on improving their business, rather than accounting. Many manual accounting methods are not only inconsistent, but very time consuming as well. With a standardized system, the bulk of the work is in the beginning when the owner is learning how to use the system. Once the system is learned, the accounting function takes significantly less time and is much less frustrating.

4. The academic literature covers many issues that can lead to recommendations for Rolando and Rosa. One such recommendation is to develop a system for accounting for the fair market value of franchise rights (Kohlbeck, Cohen & Holder-Webb, 2009). Since they plan to give franchises to people with hardly any money and no experience, they will probably have to buy back some of these franchises at some point. The accounting of fair value for these buybacks is a current issue in accounting and auditing, and it would behoove Rolando and Rosa to have a system for measuring fair value as the standards regarding this issue evolve.

Calegari (2010) raises another good point about accounting for franchises -- joint ventures. The case of Krispy Kreme Donuts highlights the need for adequate accounting of joint venture profits (or losses). Rolando and Rosa may structure some of their franchise deals as JVs with existing hair salons looking for the boost that a franchise might give. This is especially possible if financing is not easy to find for hairdressers with just 25% of the up-front cost saved. A joint venture would allow R&D to act as de facto financier of the franchise, but this arrangement requires proper accounting. If not, as the Krispy Kreme case notes, the expectations that external stakeholders have for revenues and net income from these ventures may be overly optimistic. Worse, R&R could over-report their income if the system they devise is too complex for them to truly understand.

I also recommend that they implement GAAP in their accounting procedures. In addition, they should familiarize themselves with the other recommendations in the FTC Franchise Rule Compliance Guide (Gilbert & Loonam, 2008-2009). For example, there is guidance of ensuring that the previous business (the current incarnation of Hair Emporium) is classed as a predecessor business when it becomes a franchisor -- it is not sufficient to purchase the assets of the old business. There are also recommendations with respect to the disclosure of litigation. The larger a business becomes the more likely it is to have pending litigation against it. This is an issue that can affect the pricing of a new franchise, so it is important to Rolando and Rosa. They need to be aware of FTC guidance on this issue. Thus it is recommended that R&R familiarize themselves with the material… [read more]


Accounting Method and Coca-Cola Questionnaire

Questionnaire  |  2 pages (594 words)
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Accounting Method and Coca Cola

How does the Coca Cola Company account for its investment in coca cola enterprise, Inc. (CCE)? What are the accounting implications of the method Coca-Cola uses?

The way that Coca Cola accounts for the investment in Coca Cola Enterprises (CCE) is through utilizing generally accepted accounting principles (GAAP). The possible implications of using GAAP-based protocols are there could be more conservative figures reported. This will make it difficult to accurately value both organizations. However, beyond this issue these methods can help to improve transparency and confidence. This is when investors will have faith in the business model of both organizations. (Kothari, 2010, pp. 246 -- 286)

What criterion does Coca-Cola use to choose the method of accounting for its investment in CCE?

Coca Cola chose the method of accounting based on the integration of CCE with the organizations itself using GAAP standards. At the same time, the firm is carefully examining what are the strongest regions of growth for the brand. In this case, the best areas were North America and the Caribbean. The combination of these factors caused the company to focus on how they can increase their bottom line results and improve transparency. The best way they were able to achieve this was to use GAAP-based principals (which is the same standard utilized by Coca Cola). ("2010 Annual Report," 2011)

Describe the relationship between Coca-Cola and CCE?

The relationship between the two organizations is strong. The main reason is both firms are dependent upon one another in providing the various products and services that are sold to customers. This makes any kind of integration more effective due to similarities in business models and operating procedures. ("2010 Annual Report," 2011)

Calculate the debt-to-equity ratios in the most recent two years for…… [read more]


Transparency Essay

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Accountancy ahs managed to provide a metric for controlling tangible assets but, as yet, it has been difficult to formulate one for monitoring intangible assets, such as intellectual property. The UK government, in their 'Accounting for People' initiative, did implement three new terms of intangible capital (i.e. human capital; customer or relational capital; and organizational or structural capital). These are terms that are borrowed from economics and reflect the borrowing of one field from another. The British government also, at one time, required that employers should include information in their financial statements regarding their people management activities. This changed, however, when UK companies were only required to include information about their employees in their operating and financial reviews. Even now, there are constant difficulties with implementing metrics related to intangible assets, primarily due to finding a methodology that would be able to develop non-financial metrics.

The Danish capital too, has been another instance of a government that tried to experiment with introducing intellectual capital into its capital reporting. Given the limitations that are existent with matching measurements to intangible non-financial assets, difficulties have been profound. Observers believe that a way to do so may yet be found (Roslender & Stevenson, 2009), but this remasins the challenge of the next decade. Accounting, as the term implies, has to denote accountability to the people of the actions of the corporation. Accountability, therefore, may extend not just to material goods but also to intangible capital, e.g. To employees. Incorporating such a step would be pushing the tag of transparency for accounting still further and dealing with the challenge of the next decade.

Sources

Fombrun, C. & Foss, C. 2004, 'Business ethics corporate response'. Corporate Reputation Review, 7, pp.284 -- 288

Greer, L. & Tonge, A. 2006, 'Ethical foundations: a new framework for reliable financial reporting' Business Ethics: A European Review, 15(3), pp. 259-270, Wiley Online Library [Online].

Roslender, R. & Stevenson, J. 2009 'Accounting for people: a real step forward or more a case of wishing and hoping?' Critical Perspectives on Accounting, 20 (7), pp.855-869, ScienceDirect [Online].

Tilley, C. 2010 'Beyond 2010: Accountants in the next decade.'

The Sarbanes-Oxley Act, 2002. Retrieved 2/6/2012 from: http://frwebgate.access.gpo.gov/cgibin/getdoc.cgi?dbname=107_cong_bills&docid=f:h3763enr.tst.pdf.… [read more]


US GAAP vs. IFRS Research Paper

Research Paper  |  6 pages (2,231 words)
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U.S. GAAP vs. IFRS

Accounting procedures across the world confirm to two international standards i.e. U.S. GAAP -- Generally Accepted Accounting Principles and the IFRS -- International Financial Reporting Standards. Major countries like the UK, France, Germany, Japan and Australia use either one of the two standards. Most application of these international standards reveals the institutional framework of the individual… [read more]


Eitf as Relates Research Paper

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The FASB only steps in when the EITF cannot reach a consensus. Therefore, in the situation where the accounting professional decides to a global set of accounting standards, they will need to be ratified by the EITF in order for the practice to be standardized across the various organizations in the same sector.

Therefore, the EITF would play a role of looking into the adoption of this new accounting practice as an emerging accounting issue and a debate would arise about this. The EITF members will then research into the global set of accounting standards then look at their applicability in the U.S. And what accounting and financial reporting rules would need to be changed for the accounting standards to be made the common practice.

References

Beresford, D.R. (1998). THE FASB'S ACCOMPLISHMENTS TO DATE: ONE PARTICIPANT'S VIEWS. The Accounting Historians Journal, 25(2), 151-166.

Emerging Issues Task Force. (2012). Description and Status of Current Issues Retrieved May 20th, 2012, from http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1218220137528

Financial Accounting Standards Board. (2012). Statement of Cash Flows (Topic 230): Not-for-Profit Entities: Classification of the Sale of Donated Securities in the Statement of Cash Flows a consensus of the FASB Emerging Issues Task Force. Connecticut: Financial Accounting Standards Board.

May, J., Paul, R., & Uhl, B. (2009). EITF…… [read more]


Independence Between the Auditor and Client Essay

Essay  |  2 pages (491 words)
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¶ … auditor maintains a professional independence when working with their clients in issues concerning the assurance of the financial statements. Indeed all businesses want to realize the best bottom line whenever they produce their financial statements by striving to make them appear as attractive as possible for various reasons. In most cases the attractiveness is intended for the end users of the various financial statement.

Mautz and Sharaf (1961) noted that auditor independence is the very cornerstone of auditing as a profession. Auditor independence is therefore noted to be a crucial element in the corporate reporting process. It also acts as a critical prerequisite for the addition of value to the financial statements that have been audited. The recent accounting scandal involving big corporations like Enron in the U.S. have obviously cast doubt over the concept of auditor independence as well as the very value of auditing. As Louwers et al. (2011) noted, one of the main elements of financial assurance services is the maintenance of independence. Auditors therefore strive to maintain a high level of integrity whenever they are providing the assurance services.

The meaning and need of auditor independence

Independence is an essential feature of audit and therefore if an accountant works and audits himself, this in actual sense cannot be considered an audit since it lack independence. The AACA Code of Ethics clearly defines independence as comprising of independence of both mind and appearance.

The importance of independence in regard to…… [read more]


Ethics in Accounting and Financial Decision-Making Term Paper

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¶ … Spinning the numbers: handling an ethical dilemma over accounting practices can be doubly difficult when it's not certain that the practices themselves would breach the bounds of acceptability - Ethics" (December 2002) HR Magazine.

This article, entitled, "Spinning the numbers: handling an ethical dilemma over accounting practices can be doubly difficult when it's not certain that the practices themselves would breach the bounds of acceptability - Ethics" from HR magazine (December 2002) begins with a compelling scenario. Unlike the dilemmas of black and white that have gripped the headlines, this article presents what is often known as an ethically grey scenario, where one member of a firm lets the other member know that he uncertain of what to do because "there's something going on at work" that is troubling him as an accountant, from an ethical point-of-view.

As the article progresses, Jim then tells Fred, over the course of this hypothetical scenario, that in strict confidence -- "the company's chief financial officer was planning to have Summitt take an aggressive stance on sales revenue reporting that, in Jim's view, would stretch the boundaries of acceptable accounting practices." (HR Magazine, 2002) in other words, the accounting practices that would now be adopted could put the firm in possible jeopardy -- not only were they legally and ethically questionable, but if brought to light, could put the firm under public scruitny. On one hand, Fred, the aforementioned and unwilling confidant of Jim, does not want to be a party to potential improprieties, but on the other hand he does not want to put company stockholders in financial jeopardy by disclosing evidence that could injure the firm's otherwise blameless and salutary reputations.

Jim's lack of specifical knowledge about accounting is no excuse -- and Fred's disclosure is potentially alarming, given that not only did the friends have a personal agreement regarding keeping business to the side during their private meetings, but because he should not, regardless of his troubles, bring other and unrelated members of the firm willy-nilly into this matter.

The first organizational lesson from which to draw from this scenario is that a firm must have an ethical troubleshooter, to which individuals can report troubling matters, without fear of disclosure.…… [read more]


Ethics and Independence Term Paper

Term Paper  |  6 pages (1,585 words)
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The effects of ethics on the profession have been many, not all of which are perceived as negative. In fact many effects have resulted in a higher ethical standard. Professionals that are accustomed to working independently are finding more and more that their actions are monitored, measured and assessed to ensure that they are upholding the highest standard of ethical behavior at all times. This trend will likely continue through the next decade, until the public is once again assured of the competency and ethical nature of the business.

Individuals working within the profession will continue to be subject to regular auditing and monitoring of performance. This should however, be viewed in a positive light, as a method for ensuring that the profession is serving the best interests of the public, rather than acting in a manner that is self serving and unproductive.

References:

Dettmer, J. (2002). "Enron casts dark shadow on academe." Insight on the News, 18(9):

47

Rothenburg, E. (2003). "Incorporating business ethics into introductory accounting courses." The CPA Journal, 73(10): 6

Sack, R. (1991). "Integrating ethics into the accounting curriculum." Journal of Accountancy, 172(4): 43

Student Text. "Ethical Issues." Chapter 4, Professional Ethics, p. 75

Warth, R.J. (2000). "Ethics in the accounting profession: A study." CPA Journal,

70(19):69

Chapter 4, Professional Ethics, p. 75.

Op. cit ibid.

Op. cit. ibid, p. 76

ibid, p. 77.

Ibid, p. 76.

Warth, R.J. "Ethics in the accounting profession." P. 68

ibid.

ibid.

ibid.

Rothenburg, E. "Incorporating Business Ethics into Introductory Accounting Courses." P. 6

Ibid.

Sack,…… [read more]


Discontinued Operations Depreciation and Amortization Term Paper

Term Paper  |  4 pages (1,029 words)
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Accounting

Discontinued Operations, Depreciation and Amortization

Discontinued Operations, Depreciation and Amortization Policy Memo

This memo aims to address the recent business dealings between Winning Big (WC) and Bugsy Siegel from an accounting standpoint. The project entailed researching accounting issues from the FASB, AICPA and the SEC as well as any available pronouncements, bulletins, interpretations, or concept statements that pertained to the business arrangement. The memo was based on the assumption that the scenario was to be researched thoroughly and reported back to management. The memo will first attempt to decipher any issues and concerns, site applicable professional pronouncements pertaining to those issues and to discuss viable accounting alternatives available. The questions being asked are if WB should record the disposal of PC and T. As a discontinued Operation and if they should halt depreciation and amortization of its assets that were involved in the transactions. Of the possibilities, a choice of which choice would be the correct option for these scenarios and why is therefore addressed.

The scenario facts were that Bugsy Siegal owned 10m shares of a publicly traded organization called Winning Big. The parties came to a two part buy back agreement of those 10m shares which included:

35 per share * 8m shares = $280m financed with bank debt and publicly bonds

35 per share * 2m shares = $70m but in exchange represents a 100% stock for Paradise City (PC) and 25% interest in Trifecta (T).

PC's book value (with allocated goodwill is $30m and an inter-company payable of $3m) is $45m / the 25% in T. represents a value of $4m.

After fees and book values of PC and T, WB has a pre-tax book gain of $20m.

The problem is that WB will need to establish certain requirements in regard to the accounting and reporting as well as to establish the true gain or loss from the disposal. WB will have to create the separate line of business and operations must be identified. The physical assets and results of the operations for PC and T. will need to be segregated for any internal financial reporting purposes. For the reporting requirements, WB will need to show a separate item on their income statement after the income tax expense is reported and also they will need to show a net tax. Another reporting requirement will need to be broken out as income / loss from operations prior to the official transfer date the company adopts a plan to dispose of PC and T. The other reporting requirement would be to clearly define the gain/loss of the disposal.

Possible issues relate to the measurement date and disposal date. If both are the same reporting period, then each component of the discontinued operations for PC and T. would be calculated for that date. However, if the measurement date and the disposal date are in different periods, then specific updates will be required to accurately document operations and other reporting functions such as depreciation and amortization. Since in this… [read more]


Tax Law Taw Term Paper

Term Paper  |  4 pages (1,034 words)
Bibliography Sources: 1+

SAMPLE TEXT:

There are several advantages of a corporate income tax including:

Perception of fairness in taxing profits rather than total sales or activity.

Possibility of interstate cooperation on issues affecting the great majority of states.

The disadvantages of a corporate income tax includes:

Corporate income tax is an extremely volatile tax, with revenue levels subject to great fluctuations and generally much lower during economic downturns.

Generally, state corporate income taxes are declining as a long-term source of revenue.

The tax is subject to great accounting complexity and potential manipulation with respect to taxable net income.

There is no direct relation between profitability and dependence on government services.

Companies effectively keep two sets of books under two sets of accounting rules: tax accounting and Generally Accepted Accounting Principles (GAAP) (Marcus, 1993). The tax rules are used to calculate profitability solely for the purposes of paying taxes, while GAAP accounting is used for everything else, especially reported profits from public companies. Companies have an incentive to bend the rules one way (minimize profits) for tax purposes, and the other way (maximize profits) for public reports. By making the tax accounting rules the same as GAAP, and requiring that companies pay taxes on the actual profits they report to shareholders, two things may be accomplished:

Companies which "push the envelope" on their accounting in order to boost profits for Wall Street will have to pay more taxes as a result, reducing the incentive for abusive accounting; and Companies will have less incentive to use loopholes or accounting tricks to reduce the taxes they pay, since that will also cut their reported profits (Dupell, 1997).

Thus, less accounting fraud and more tax dollars may be collected. Furthermore, companies will only have to prepare one set of financial statements, reducing their legal and accounting expenses.

Overall, internationally recognized accounting standards such as GAAP can be seen as a coherent set of rules for accounting and reporting that should give investors a "true and fair view" of the financial situation (balance sheet), performance (income statement) and changes in the financial position (cash flow) of an economic entity at a given moment (Reinstein & Budzinsky, 1992). In the field of taxation, however, some widely accepted principles clearly deviate from concepts used for financial accounting and reporting purposes. In addition, tax laws often provide for non-fiscal objectives, e.g. The granting of specific incentives (for R& D, for special reserves, to promote self-financing, to attract certain business activities, etc.). These laws may be designed to influence the behavior of enterprises by granting incentives or using disincentives (e.g. environmental taxes or relieves). Furthermore, a country's taxation system is the result of a political decision-making process and therefore, in many cases, neither neutral for businesses nor fully internally consistent.

References

Dupell, T. (1997). Practice management companies improve practices' financial position. Healthc Financ Manage, 51(11), 56, 58-60.

Marcus, K.R. (1993). Recognizing Medicare hospital payments appeal opportunities: falling into the 'GAAP' (generally accepted accounting principles). Healthspan, 10(9), 8-12.

Reinstein, A., & Budzinsky, A.J. (1992).… [read more]


Current Revenue Recognition Issues Term Paper

Term Paper  |  5 pages (1,856 words)
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¶ … Revenue Recognition Issues

Current Issues and Actions related to Revenue Recognition:

Revenue constitutes the major single entity in financial statements, and issues entailing revenue recognition are among the most vital and intricate which standard setters and accountants encounter. Since no broad norms on revenue recognition exist there is a considerable gap between the broad conceptual guidance in the… [read more]


Sarbanes-Oxley Act Was Enacted Term Paper

Term Paper  |  4 pages (1,713 words)
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SAMPLE TEXT:

References

Accounting Experts Assess The Impact Of Sarbanes-Oxley. Retrieved from http://www.bowne.com/newsletters/newsletter.asp?storyID=880& src=BFPfeature Accessed on 26 April, 2005

Coustan, Harvey; Leinicke, Linda. M; Rexroad, Max. M; Ostrosky, Joyce. A.. Sarbanes-Oxley: What It Means to the Marketplace. Retrieved from http://www.aicpa.org/pubs/jofa/feb2004/coustan.htm Accessed on 26 April, 2005

Impact of Sarbanes-Oxley Act on Colleges/Universities. Retrieved from http://www.audit.gatech.edu/ei_sarbanes_oxley.htm Accessed on 26 April, 2005

Kulzick, Raymond S. Sarbanes-Oxley: Impacts on Financial Transparency. Retrieved from St. Thomas University. http://www.kulzick.com/rksoift.htm Accessed on 26 April, 2005

Rulison, Larry. Public opinion of CPAs starting to climb: Improvement attributed to focusing on quality. Philadelphia Business Journal. October 3, 2003. Retrieved from http://www.smartassociates.com/images/news/pbj%20public%20opinion%20of%20cpas%2010-03.pdf Accessed on 26 April, 2005

Sarbanes-Oxley Basics for Private Companies & Investors. Retrieved from http://www.pwc.com/extweb/industry.nsf/docid/FE7E76BBFAFBDCA185256CE000768BF9 Accessed on 26 April, 2005

Sarbanes-Oxley: Red tape or opportunity for treasury managers? Retrieved from http://www.lasallebank.com/commercial/pdfs/sarbanes-oxley.pdf Accessed on 26 April, 2005

The Emerging Company and the SEC: The Significance of the Sarbanes-Oxley Act. Retrieved from http://www.businessforum.com/SEC01.html Accessed on 26 April, 2005… [read more]


Accounting From an Investor's Perspective Term Paper

Term Paper  |  3 pages (1,071 words)
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SAMPLE TEXT:

Thus, some industries benefit on the balance sheet from using Last in, First Out (or LIFO) while others from FIFO (First in, First Out) methods of dispensing and recording inventory, and there is no singular way to record expenses in such a fashion that will be equally beneficial or revealing to all investors in all industries.

Lastly, there are inevitable seasonal variations in demand that affect certain industries (such as retail and the travel industry) more than others, which could create misleading pictures for investors in and of themselves to the eyes of potential shareholders, as there might seem to be significant uptakes in sales and growth that are purely related to expected market increases and/or decreases.

Recognition Position Paper

To finance a company, various stock options are possible to raise revenue. One option is to extend short-term exchange-traded options of common stock. But for a new firm these stocks cede control to many individuals and have a high level of volatility. Another option is to issue employee stock options or call options given by employing firms to their employees in compensation for labor services. The price of such options is usually set as equal the firm's current stock price. This way, additionally, employees have a more vested interest in the firm's success, especially in an early firm's start up. The employee cannot exercise his stock options at the beginning of his or her commitment to the firm and must give up the options before a set date. However, there is a fear that employee stock options can cause a company to seem over or undervalued in the marketplace, as the stocks cannot be sold to investors in a volatile fashion to increase revenue.

When calculating stock from an accounting perspective in terms of revenue, the kind of options of stocks used by the company must be considered in terms of maturity, delayed vesting, forfeiture, non-transferability, dilution, and taxes. The final model of calculating value usually includes the stock price on the day the stock is sold, stock's potential for volatility and payout rate, the stock's expected return, interest rate, option striking price, option years-to expiration and vesting, expected employee forfeiture rate, minimum and maximum forfeiture rate multipliers, as well as the employee's non-option wealth per owned option. Also taken into consideration are such difficult to estimate variables, on stock options, for example as an employee's risk aversion, employee's tax rate, percentage dilution, and number of steps in the binomial tree. A firm seeking to overvalue its options might report values almost double those reported by an otherwise similar firm seeking to undervalue its options.

The FASB prefers exercise date accounting, when such stock expenses are all recognized at the time of exercise equal to the exercise value of the option, minimizing the potential for variations in accounting. But volatility must be taken into consideration, as new corporations are more volatile, while as an entity matures it typically becomes more diversified across product lines, more common stock is sold, and… [read more]


Accounting Discipline Has Taken Term Paper

Term Paper  |  2 pages (683 words)
Bibliography Sources: 0

SAMPLE TEXT:

The increased transparency isn't just for the benefit of shareholders; company executives and government groups will also benefit from the whole picture that SOX's provisions require. More transparency will encourage better management and cost control.

The Act was initially intended to rebuild investors' confidence; this impact will be easy to track based on investment numbers. The Act also, however, will impact the industry in a variety of ways, one of those being that some publicly-held companies will find it more in their interest to go private. Scholars who have examined the switch note that privately-held firms are increasing in numbers, likely making the switch from publicly-held (or the initial decision to incorporate privately) based on the costs associated with SOX compliance. Not because these corporations want to evade regulation and fudge returns, but because the monetary expenditure on independent auditors and information technology systems to monitor everything that SOX requires is financially unfeasible.

SOX has impacted even privately held companies, however, with its focus on ethical behavior and, in the public realm, its willingness to apply criminal penalties to accounting misrepresentations and their ilk. Ethical behavior, it seems, must be required by law for it to have an influence on the boardroom today. Can an act of Congress create this ethical realm in accounting where all balance sheets are perfectly aligned and accessible to all? Maybe; what the act can do is help create a "chilling effect" between managers and auditors, groups who must work alone but have traditionally been overly friendly considering the scope of the work of each. A farther separation between managers and auditors will make honest, transparent, accounting much more simple.

Sarbanes-Oxley has changed many things in our discipline, but one of them is not this company's dedication to accuracy. I assure you, members of the board, that we are well equipped to deal with the nuances introduced in Sarbanes-Oxley as well as its more straightforward demands. We look forward to demonstrating this competence and…… [read more]


Accounting Contingent Liabilities Are Could Be Potentially Essay

Essay  |  2 pages (431 words)
Bibliography Sources: 2

SAMPLE TEXT:

Accounting

Contingent liabilities are could be potentially incurred by a firm depending on the outcome of an event within the future. These liabilities are termed contingent based primarily on the fact the outcome may or may not result in loses. The most common form of contingent liabilities occur with court cases. In many instances, the outcome of the case may or may not be in favor of the firm. As such, it is difficult for the firm to accurately depict the outcome of such an event (Keenan, 1980). Contingent liabilities are therefore used to account for the uncertainty regarding a future event that may result in loses to a company. Common forms of contingent liabilities include court cases, as mentioned above, sales tax disputes, income tax disputes, product warranty disputes, damages, and so forth. Contingent liabilities are especially important for companies looking for bank financing. The amount of possible losses is very important in regards to the overall riskiness of the firms operations. These liabilities are recorded on the company's balance sheet using a reasonable estimate of potential gains or losses. Within the balance sheet, contingent liabilities are placed in the accounts payable heading. A footnote detailing the extent of the liability is then placed on record. This footnote details the nature of the liability…… [read more]


Gasb Up Term Paper

Term Paper  |  3 pages (940 words)
Bibliography Sources: 1+

SAMPLE TEXT:

However, although there are transactions and events unique to a governmental entity and a commercial entity, there are many similar transactions and events that affect both entities economically in the same manner such as paying employees and vendors, executing lease agreements, entering into pension agreements and paying fringe benefits. Logically, similar transactions and events for all entities should be subject to similar accounting standards for comparison purposes.

To illustrate the problem of separate standards boards, three similar health care providers must now follow three different sets of standards for cash flow reporting. Investor-owned hospitals must follow FASB's requirements; not-for-profit organizations may become subject to an AICPA task force's recommendations and governmental hospitals must follow GASB's requirements.

Further, GASB's standard on pension accounting differs significantly from FASB's pension guidance. A major area where the standards differ is the extent that plan funding should affect the annual pension expense: FASB confirms using accrual-basis pension accounting, but does not accept funding calculations as measures of pension expense, while GASB mandates that the accrual-basis recognition does not assume the expense measurement has to differ from the funding measurement.

While GASB is achieving its mission for GAAP enforcement for state and local governments, it's unnecessarily introducing non-standardization between private and public entities. For this reason, a single organization with separate accounting staff for each is the best approach for accommodating the uniqueness of government agencies without forcing different rules for common transactions.

Bibliography

Garner, Martha and Grossman, Woodrin. "Consistency Endangered by FASB-GASB Dispute - Financial Accounting Standards Board, Government Accounting Standards Board - Includes Chronology." Healthcare Financial Management. Feb. 1991. http://www.findarticles.com/p/articles/mi_m3257/is_n2_v45/ai_10328665#continue (Available 5 Nov. 2005).

Hardiman, Patrick F., "Government Accounting: Who's in Charge." The CPA Journal http://www.nysscpa.org/cpajournal/old/07505202.htm May 1989 (Available 5, Nov. 2005)

Poteau, Raymond R., "Accounting Rule Making -- a Two Headed Monster?" http://www.nysscpa.org/cpajournal/old/16097612.htm The CPA Journal Jun 1994 (Available 5 Nov. 2005)

Schleier, George C., "GASB and FASB View of Pensions: the Two Contrasted." The CPA Journal. 1990 May. http://www.nysscpa.org/cpajournal/old/08526770.htm (Available 5 Nov. 2005).

Garner, Martha and Grossman, Woodrin. "Consistency Endangered by FASB-GASB Dispute - Financial Accounting Standards Board, Government Accounting Standards Board - Includes Chronology." Healthcare Financial Management. Feb. 1991. http://www.findarticles.com/p/articles/mi_m3257/is_n2_v45/ai_10328665#continue (Available 5 Nov. 2005).

Poteau, Raymond R., "Accounting Rule Making -- a Two Headed Monster?" http://www.nysscpa.org/cpajournal/old/16097612.htm The CPA Journal Jun 1994 (Available 5 Nov. 2005)

Hardiman, Patrick F., "Government Accounting: Who's in Charge." The CPA Journal http://www.nysscpa.org/cpajournal/old/07505202.htm May 1989 (Available 5, Nov. 2005)

Ibid.

Ibid.

Poteau.

Ibid.

Garner, Martha and Grossman, Woodrin.

Schleier, George C., "GASB and FASB View of Pensions: the Two Contrasted." The CPA Journal. 1990 May. http://www.nysscpa.org/cpajournal/old/08526770.htm (Available 5 Nov. 2005).… [read more]

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