"Accounting / Auditing" Essays

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Auditing the Main Problem Related Term Paper

Term Paper  |  1 pages (334 words)
Style: MLA  |  Bibliography Sources: 3

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Auditing

The main problem related to many companies leaving Andersen, despite the fact that its Houston office had no part in servicing the engagements, is perception. Primarily, Andersen had a significant business relationship with Enron, which was its largest client. With Enron's demise, this relationship was seen as universally damaging, regardless of the areas of the company that had nothing to do with the scandal.

Secondly, Andersen's reputation even before its relationship with Enron was not crystal clear to begin with. Indeed, its reputation had already been damaged by several investigation into its other accounting and auditing practices. The Enron scandal appears to just have been the final nail into the coffin. It appears then that, regardless of any true wrongdoing, its mere association with the scandal brought about irreversible damage.

If I had an accounting career, my reputation could be damaged by turning a blind eye when I see discrepancies in the accounting practices of my clients. Even if I knew nothing about these concealments, any…… [read more]


Normative Versus Positive Accounting Theory Term Paper

Term Paper  |  12 pages (3,248 words)
Bibliography Sources: 6

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Normative vs. Positive Accounting Theory

In the past few decades, accounting theory has slowly evolved; as a result, various research methodologies have been utilized to study the development of accounting theory. As accounting theory has developed, debates have emerged regarding the manner in which financial theory should be developed and applied in the accounting profession. This has been essentially a… [read more]


Accounting Research in the Past Decade Term Paper

Term Paper  |  2 pages (525 words)
Style: APA  |  Bibliography Sources: 2

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Accounting Research

In the past decade, several scandals involving the improper management of financial data have emerged, bolstering the importance of accounting practices to the forefront of many industries. As a result, various research methodologies have been utilized to study the development of accounting theory. The development of accounting theory has early origins; a majority of the research was conducted in the 1950's and still continues to the present. Deductive, inductive and pragmatic research methods have successfully been applied to research in the accounting area, and variations of accounting research based on these basic foundations have become widespread. This paper will discuss and outline the deductive, inductive and pragmatic accounting research methodologies. It will also use include examples of accounting research that use each of the well-known research methods.

Deductive, Inductive & Pragmatic Research Methods & Examples

Deductive research strategies usually consist of non-empirical studies that are primarily verbal, descriptive-type articles where a logical conclusion follows from a set of assumptions or premises. An example of accounting research that uses this method is historical research that uses archival methods to study an issue of current interest. Also included in historical research are papers that trace the development of a practice or concept using secondary sources and book reviews of accounting classics (Fleming et.al., 2000). In addition, this category was interpreted to include inductive and legal research methods as well (Fleming et.al., 2000). Another accounting methodology used in deductive research is capital market studies, due to the fact that they use security prices to measure reaction or association.

Inductive research strategy has been…… [read more]


Professional Standards of Auditing Term Paper

Term Paper  |  1 pages (457 words)
Style: MLA  |  Bibliography Sources: 2

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Professional Standards of Auditing

According to AICPA - rule 102 (1999) and IFAC (2007), the signing, allowing or directing someone else to sign a document that contains false or misleading information qualifies as knowing misrepresentation and its implications refer to the loss of the auditor's credibility. Indirectly it has a serious impact on his or her firm with respect to integrity, independence and objectivity, which are essential in this line of work.

Courses of action. The first step is to inform the client's management about the discrepancy, which in our case already happened. However, since nothing changed, the problem has to be addressed to a high level of authority. All the implications have to be clearly explained so that the client understands the necessity having the $50,000 reflected in the company's financial statement. At this point the auditor should also start documenting the discrepancy and explain the client the possible outcomes of such a document. In case there will be an external audit resulting in identifying the same discrepancy and the fact that it hasn't been solved despite the auditor's advice, the consequences will more than offset the value of the illegally transferred funds. The last step suggested by AICPA has to do with taking action and expose the discrepancy to the state authorities since it is considered illegal. In our case, since the law is very strict…… [read more]


Accounting Generally Accepted Accounting Principles as New Term Paper

Term Paper  |  2 pages (739 words)
Style: Chicago  |  Bibliography Sources: 2

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Accounting

Generally Accepted Accounting Principles

As new types of transactions evolved in trade and commerce, accountants develop rules and procedures for recording them. These accounting rules, procedures and practices came to be known as the Generally Accepted Accounting Principles. It encompasses the conventions, rules and procedures necessary to define what are accepted accounting practice. It is conventional, that is they become generally accepted by agreement, often tacit agreement rather than derivation from a set of postulates and basic concepts. The principles have developed on the basis of experience, reason, custom, usage and practical necessity.

Historical Cost

In recognition of asset accounts in the financial statements, inherent is the Historical Cost Principle. This principle requires that assets should be recorded initially at original acquisition cost. This initial cost may be carried out without change, may be changed by depreciation, amortization or write-off, or may be shifted to other categories. This principle is applicable in cash transactions. In non-cash or an exchange transaction, the cost is equal to the fair value of the asset given or fair value of the asset received, whichever is clearly evident. In the absence of fair value, the cost is equal to the book value of the asset given.

C. Accrual Basis vs. Cash Basis Accounting

The preparation of financial statements every accounting period is usually based on accrual accounting - that income is recognized when earned regardless of when received and expense is recognized when incurred regardless of when paid. Cash basis on the other hand, recognizes income only when cash received and expenses only when cash is paid.

D. Current Assets and Liabilities vs. Non-current Items

Assets and Liabilities are classified only into two, current and non-current items. Separate classification is useful by distinguishing between assets and liabilities that are continuously used in determining working capital from those used in long-term operations. Current assets are those resources expected to be utilized for current operations and current liabilities are those expected to be paid within the operating cycle the operating period being usually one year. Assets and liabilities not within the classification of current are deemed non-current items.

Balance Sheet, Income Statement and Cash Flow Statement.

A balance sheet is a formal statement showing the…… [read more]


Current Event: Accounting Many Entrepreneurs and Owners Term Paper

Term Paper  |  1 pages (355 words)
Style: MLA  |  Bibliography Sources: 1

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Current Event: Accounting

Many entrepreneurs and owners of small businesses downplay the importance of taxes, to their detriment according to Hershey. Although not nearly as exciting or creative as the rest of small business development, proper accounting can help managers save money and avoid costly penalties. Taxes and the accounting activities that promote good tax reports are essential to the survival of any business. Without proper accounting know-how, business owners may neglect to claim valuable deductions or create incorrect totals even when using accounting software. Business owners should consider hiring trained accountants at least so their taxes are in order.

The entrepreneurial spirit is built into the American dream. Moreover, the number of new small businesses has increased recently as an aging baby boomer population seeks new ways to secure income after retirement. Before small businesses get off their feet, Hershey advises that owners pay close attention to how their business can and should be structured for tax purposes. Sole proprietorships, partnerships, and incorporated businesses are each taxed differently. Accountants also take into consideration personal tax returns…… [read more]


Accounting Information System for Harmonization, Siva Sankaran Term Paper

Term Paper  |  2 pages (569 words)
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Accounting Information System for Harmonization," Siva Sankaran and Dhia AlHashim (2006) make an argument for a harmonization of varied accounting systems into a common web-based platform. Currently, different organizations use varied accounting systems, a practice that is increasingly at odds with the growing globalized economy. To facilitate the globalized way that many organizations are conducting their businesses, Sankaran and AlHashim (2006) point to the need for an international accounting system that is able to "harmonize" or adapt to these different accounting systems. Making this program web-based would further allow for a more synergistic global economy, since an Internet-based program would be accessible throughout the globe.

The authors of this article make a strong case for the need for harmonized accounting standards and procedures. Many large corporations have substantial dealings both domestically and in many parts of the world, creating the need for a system that could handle its diverse accounting needs. Similarly, different investors need to make economic choices, and their success is greatly influenced by their ability to compare financial information. The harmonization of financial reports also ensures that corporations and watchdogs -- both industry and from national and international governments -- are able to detect any corporate wrongdoing.

In devising a harmonized model of accounting, the authors noted a number of challenges. First, they note the current incompatibility of hardware and software programs within companies, and the accompanying security risks that harmonization entails. They also note that different accounting practices are in place in different parts of the world. However, the authors believe that their generalized model provides a practical architecture for computer-assisted harmonization. The model that they present includes a user friendly interface, a detailed directory service to aid a user…… [read more]


System Controls Term Paper

Term Paper  |  2 pages (782 words)
Bibliography Sources: 1

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CBU's New Accounting System

Periodic Inventory System Instituted at CBU

There are Periodic and Perpetual systems of inventory. Under the Perpetual system the inventory is constantly updated when the merchandise is purchased, and is also double-entried by recording the cost of the merchandise in the "Cost of Goods Sold" account, debited at the time of each sale. The Perpetual Inventory System asks that the merchandise be continuously recorded in one or more Purchases Accounts each time a purchase is made. CBU may have had this system in the past, but it has instituted a new system, the Periodic System. (Accounting)

Under the Periodic system, which CBU obviously has begun to use with their new computer system, the Inventory account is not updated when purchases are made, but is adjusted at the end of the year. However, the Inventory Account is not reduced by that amount. Only at the end of the year, when the Purchases Accounts are closed is the Inventory account adjusted to equal the cost of the merchandise. This Periodic system allows for no "Cost of Good Sold" account to be updated when a sale of merchandise occurs. The problem with Periodic Accounts is that there is no way to tell from the general ledger accounts how much inventory there is during the year, or how much inventory has been sold.

On January 1, CBU installed a new computer system for tracking and calculating inventory costs. Accountant A was proud of having a good system of internal control. CBU had followed good internal control procedures by having a regular physical inventory count to safeguard a valuable enterprise resource." (The system was obviously a Periodic Inventory system, but a physical check was done periodically, in order to add control numbers.) Double-entry accounting is the basic standard system to record variables, so that a record was kept in two areas of any changes in inventory. If the item was purchased (debit inventory) then it must also be paid for (credit bank account). Balances are kept during periodic counts, but on the Inventory account adjustments would not be made at that time. Waiting until December 31 to adjust entries is standard for the Periodic Inventory system, which CBU uses. It is all right to have an Adjusting Entry, to reflect actual numbers, however, as Accountant A mentioned, to safeguard the resources.

Accountant…… [read more]


Legislative Counsel Bureau Audit Division Term Paper

Term Paper  |  4 pages (1,121 words)
Style: APA  |  Bibliography Sources: 1

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Audit Report: Nevada Athletic Commission

Legislative Counsel Bureau Audit Division:

Audit Report on "Nevada Athletic Commission"

Brief Description of Nevada Athletic Commission

The Nevada Athletic Commission (NSAC), first established in 1941, is a five-member body appointed by the State Governor for a three-year term. It regulates all contests and exhibitions of unarmed combat within the state of Nevada, through issuance of licenses to hold contests or exhibitions where an admission fee is charged, and to all contestants, promoters, boxers, seconds, ring officials, managers, and matchmakers who participate in a professional contest or exhibition. "Unarmed combat" in Nevada includes sports such as boxing, professional wrestling, kickboxing, and martial arts. The Commission is the final authority on licensing matters, and has the powers to approve, deny, revoke, or suspend all licenses for unarmed combat. Due to Nevada's prominent role as a center for combat sports, the NSAC is often regarded as the preeminent state athletic commission in the United States.

The Commission meets its expenditures by collecting fees from the sale of tickets, and the sale or lease of radio, television, and motion picture rights. Its responsibilities also include ruling in disciplinary cases, and in disputes between contestants and their managers, which are brought to it. In addition, the NSAC is responsible for enforcing the Nevada State laws governing unarmed combat.

The Commission approves all championship bouts and special events and appoints the judges and referees to supervise the contest; it also determines befor hand that a contestant is not banned or suspeded by any athletic commission and ensures that a contest is not a gross mismatch.

The Findings of the Audit Report

The auditors found that the Nevada Athletic Commission needs to improve its financial and administrative practices in certain areas by clarifying regulations and improving agency revenue collection procedures. The audit report findings pointed out the following areas that needed improvement:

Defective Fee Reporting Process

Inequitable Fee Computation: Due to lack of adequate guidance in the Commission's regulations and procedures, the process of computing and collecting the promoters' event fees has become overly complex. The complexity has resulted in the fees not being always computed correctly. For example, the report found that when determining event fees, regulations allow promoters to exclude complimentary tickets totaling up to 4% of the seating capacity, but the procedures in place do not provide sufficient guidance on how the exemption is to be applied. This leaves room for errors, inconsistency, and inaccurate calculation of the payable fee. As a result, some promoters paid more than the required amount while some others paid less. In one instance, the Commission had allocated the exemption to the most expensive seats, thus reducing the amount paid for an event; in other instances, two promoters did not get the complimentary tickets exemption for not having provided sufficient detail, while two others who had provided the same level of detail were allowed the exemption. The auditors, therefore, recommended a standard fee reporting form.

Delayed Payments: The complex procedures results in the… [read more]


Federal Government Accounting Versus Private Sector Term Paper

Term Paper  |  5 pages (1,401 words)
Bibliography Sources: 1+

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Federal Government Accounting vs. Private Sector Accounting

In the United States, Governmental accounting is the aggregate notion for several accounting systems exploited by different public bodies for their accounting and financial statement purposes. There are three major governmental levels at which the bodies follow different accounting standards worked out and monitored carefully by private bodies. Federal Accounting Standards Advisory Board… [read more]


International ACCT Standards Term Paper

Term Paper  |  5 pages (1,969 words)
Bibliography Sources: 1+

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International Accounting Standards

There is now an international movement towards common accounting standards for all countries, and as a major economic power, United States has an important role to play in the matter. There are various points-of-view regarding the action that should be taken by United States in this regard.

The position regarding this in the current month is that… [read more]


Finance Comparing Nike vs. Adidas Term Paper

Term Paper  |  3 pages (766 words)
Bibliography Sources: 1+

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Adidas -- Adidas's financial data includes current assets, non-current assets, current liabilities, non-current liabilities, accounts receivable, inventories, goodwill, borrowing and credit lines, pensions and similar obligations, shareholders' equity, operating expenses, and income taxes (Adidas, Balance Sheet).

l. What were the dividends over the last three years?

Nike -- The dividends were 0.95 per share in 2005, 0.74 per share in 2004, and 0.54 per share in 2003 (Nike, Ten-Year Financial History).

Adidas -- The dividends were 1.30 per share in 2004, 1.00 per share in 2003, and 1.00 per share in 2002 (Adidas, Financial Highlights: Five-Year Overview).

m. does the company have more than one type of stock (common, preferred, treasury)?

Nike -- Nike has Class A common stocks and Class B common stocks (Nike, Annual Report 2005).

Adidas -- Adidas only has common stocks.

n. How many common stock shares are outstanding?

Nike -- 98.1 Class A common stocks and 168.0 Class B common stocks were outstanding as of June 30, 2005 (Nike, Annual Report 2005).

Adidas -- 46,023,655 common stock shares were outstanding as of June 30, 2005 (Adidas, Basic Data).

o. Does the company have any outstanding bonds?

Nike -- Nike does not have any outstanding bonds.

Adidas -- Adidas does not have any outstanding bonds.

References

Adidas. "Basic Data." 2005. Retrieved October 1, 2005. URL: http://www.adidas-group.com/en/investor/share/default.asp

Adidas. "Financial Highlights: Five-Year Overview." 2005. Retrieved October 1, 2005. URL:

http://www.adidas-group.com/en/investor/key_financial_data/default.asp

Adidas. "History." 2005. Retrieved October 1, 2005. URL: http://www.adidas-group.com/en/overview/general_information/default.asp

Adidas. "Share Price." 2005. Retrieved October 1, 2005. URL: http://www.adidas-group.com/en/investor/share/share_price/default.asp

Adidas. "Financial Analysis." 2005. Retrieved October 1, 2005. URL:

http://www.adidas-group.com/en/investor/reports/annually/2004/en/f_fs_ar.html

Adidas. "What We Do." 2005. Retrieved October 1, 2005. URL: http://www.adidas-group.com/en/overview/history/default.asp

Nike. "Annual Report 2005." 2005. Retrieved October 1, 2005. URL: http://www.nike.com/nikebiz/investors/annual_report/ar_05/docs/2005_10k.pdf

Nike. "Stock Quote." 2005. Retrieved October 1, 2005. URL: http://invest.nike.com/quote.cfm

Nike. "Ten-Year Financial History." 2005. Retrieved October 1, 2005. URL: http://www.nike.com/nikebiz/investors/financial/docs/10-yr_financial_history2005.xls

Nike. "Timeline." 2005. Retrieved October 1, 2005. URL: http://www.nike.com/nikebiz/media/nike_timeline/nike_timeline.pdf… [read more]


FASB, SEC and PCAOB the Financial Accounting Term Paper

Term Paper  |  4 pages (1,571 words)
Bibliography Sources: 1+

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¶ … FASB, SEC and PCAOB

The Financial Accounting Standard Board -- FASB is seen to be an important organization, the primary goal of which is to devise Generally Accepted Accounting Principles in United States and has close resemblance to Government Accounting Standards Board operating in the sphere of local and state governments in the United States. Its origin is… [read more]


Government Accounting Is Substantially Different Term Paper

Term Paper  |  2 pages (596 words)
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It is, after all, the most important duty of a state to balance its entire budget, not to focus too narrowly on one single fund; for example, a surplus in one individual fund can balance out increased expenditures in another, otherwise, additional debt service may be necessary to balance the financial statement as a whole.

An even more specific example of these balancing maneuvers is shown on page 42, the "Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances," which outlines why some amounts reported are different in the Statement of Activities; eight separate reasons behind the discrepancies are listed. (GA CAFR 2004) One specific instance of a difference in a fund statement with the general Statement of Activities is that "inventories accounted for using the purchases method are reported in the government funds. [However,] in the Statement of Net Assets, such amounts are reported as assets until the inventory is consumed." (GA CAFR 2004, p. 42) Different accounting methods and reporting mechanisms among different funds, which operate to a great extent independently of one another and of general fund oversight, result in a need for a reconciliation in a comprehensive statement such as that of the state as a whole.

In the summarization of significant policies, the CAFR states that "separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds." (GA CAFR 2004, p. 50) The duty of the state, in an accounting capacity, is to ensure that all of these separate statements can be reconciled into one comprehensive and balanced statement for the entirety of the state.

Work Cited

Georgia Comprehensive Annual Financial Report, 2004. Prepared by State…… [read more]


Fall of Enron Worldcom and Authur Andersen Term Paper

Term Paper  |  6 pages (1,740 words)
Bibliography Sources: 0

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¶ … Fall of Enron, WorldCom and Arthur Andersen

What a tangled web we weave, when first we practice to deceive." Deception is what Enron was all about. From the beginning of its rise to prominence, it was little more than a shell game, designed to make a few selected executives rich, at the expense of other employees and shareholders.… [read more]


History of the International Accounting Term Paper

Term Paper  |  2 pages (574 words)
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The requirements for membership relate to technical competence and the ability to function independently.

In terms of ethics, the IASB requires all its members to be meticulous in setting and following international accounting standards. The enforcement of these standards is also an important issue that should be applied uniformly worldwide. Noncompliance appears to be a problem, and the Board's reaction to this is the inception of regulating bodies in order to ensure enforcement.

One of the problems faced by the Board is the very fact that it is international. Problems related to this include the fact of cultural diversity. The code of the board is to recognize cultural differences and promote a culture of diversity within its professional activities. Standards should thus be set that transcend individual cultural values.

Issues that should be addressed include corruption fraud and misrepresentation, while dealing with the challenge of enforcing these regardless of cultural barriers. The Board thus works towards being globally accepted, and is currently operating in over 180 countries around the world on a consistent basis.

A high quality of regulating committees, as well as a standard of control should be implemented in order to make the work of the Board easier. Each culture should be penetrated by recruiting members from the culture. These members can then serve as interpreters for companies from their country and help them accept the accounting standards as approved by the Board. Furthermore these members can serve to help the Board achieve a greater understanding of how ethics and values function in foreign cultures.

Sources

IASB Web site. www.iasb.org.uk/

QuickMBA.com. "Financial Accounting Standards." 1999-2004. http://www.quickmba.com/accounting/fin/standards/

Wikipedia. "The International Accounting Standards Board." http://en.wikipedia.org/wiki/International_Accounting_Standards_Board… [read more]


Hand Crafted Cheese Term Paper

Term Paper  |  3 pages (922 words)
Bibliography Sources: 1+

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¶ … Crafted Cheese

Generally Accepted Accounting Principles (GAAP).

GAAP is a set of specific common guidelines, provided by the institutions such as the Financial Accounting Standards Board, the American Institute of Certified Public Accountants and the Securities and Exchange Commission, about "acceptable accounting practices." These acceptable practices should not necessarily be regarded as a set of ground rules. In fact, it is a common denominator, useful when foreign firms, especially auditing companies, proceed to financial verifications. The GAAP provide for an easier task from the auditing companies and anybody else who interprets the financial statements.

Historical Cost.

The historical cost is "an accounting technique that values an asset for balance sheet purposes at the price paid for the asset at the time of its acquisition." This means that the current market value or any opportunity cost are not taken into consideration. In my opinion, this methodology simplifies greatly work related to recording assets in the balance sheets. The original cost can be quickly taken from the invoice, instead of evaluating all possible costs involved.

C. Accrual Basis vs. Cash Basis Accounting.

The accrual basis accounting records payments and revenues when the actual business activity occurs. On the other hand, cash basis accounting records payments and revenues only when cash is received or paid. For example, if we buy a car in December and pay for it in February the following year, under the accrual method, the payment will be recorded in December, while under the cash method, it will be recorded in February the following year.

From this example we can also figure out the main impact of each method on the financial statement. Indeed, in this particular case, using the accrual method means that the payment is recorded in the current fiscal year. On the other hand, the cash method records the payment in the following year, because it is noted in February.

The accrual methodology is generally recommended, mainly because it is "more realistic for measuring business performance." Indeed, a manager would be able to see exactly how his company has performed in each month because the revenues are noted as each business is concluded.

D. Current Assets and Liabilities vs. Non-Current Items

In my opinion, the current assets and liabilities give a keen overview of the company's short-term solvability, but also of the company short-term revenues. Each term will provide information on how the company is performing in terms of inventory, current liabilities, etc. Many of the current assets and current liabilities entries can also be used in financial ratios that provide information on the company's overall financial health.

Part II

The financial reports are quite similar for the three companies mentioned, with mainly the same organization of the balance sheet, the income statement and the cash…… [read more]


Creative Accounting Term Paper

Term Paper  |  4 pages (1,343 words)
Bibliography Sources: 1+

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The disadvantages of such a method include higher costs for each company, the fact that the activity of accounting firms would be severely limited (from a qualitative and not a quantitative point-of-view) and the setbacks provoked by the fact that two accounting firms may have very different methods of solving some issues.

Another solution to fraudulent accounting is making accountants and financial officers more liable for the damage caused to investors. Criminal penalties for corporate financial fraud and obstruction of justice or liability for incorrectly attesting to the accuracy of their financial reports would certainly make the people involved much more careful and unwilling to perform any malfeasance.

Still, it should be mention that criminal penalties are actually a solution for the effect and not the cause of the phenomenon. Scientific studies have concluded that there is no direct relationship, as one might think, between the increase in prison sentences and the reduction of the criminal phenomenon. After all, there are always people who would risk anything, simply by believing that they will never be caught. Unfortunately, corporate fraud attracts a great number of extremely intelligent persons who are, in the vast majority of cases, never caught. Therefore, a greater effect would probably be obtained by making accountants aware of their moral and social responsibilities.

The second method, however, making the managers personally liable for the damages they have caused is actually very effective. After all, one could spend a few years in jail and then retire in the Caribbean with a 100 million in bank accounts all over the world. Still, if people would know that they would have to pay for the damages, perhaps they would not be so swift at making them happen.

All solutions should be implemented at the same time. However, if only one is to be applied, one could use the 'Plus/Minus/Implications' (PMI) decision-making technique to establish which one would be the most effective. The first solution was the setting of accounting standards by an independent board.

Plus:

1. standardized form for all operations + 5

Minus:

1. transition time needed -3

2. some standard forms may not be adequate / accepted all across the industry-3

Implications:

1. more safety in financial operations: + 5

2. increased costs (training, wages for the members of the independent board) -2

Total PMI: +5-3-3+5-3 = +1

The second solution was limiting the consulting services accounting firms can perform for their audit clients.

Plus:

1. increased safety, by avoiding conflicts of interest +4

2. more accurate financial control + 2

Minus:

1. two accounting firms doing practically the same thing -2

2. different methods employed by these accounting firms -2

Implications:

1. significantly higher costs for each company. -5

2. A larger work volume for accounting firms: -1 (the existing firms may find themselves crowded with their activity, which is not good news for their clients)

Total PMI: +4+2-2-2-5-1=-4

The third solution involved the increase of criminal penalties and making the managers personally liable for the damages they… [read more]


SAS Number 99 Term Paper

Term Paper  |  4 pages (1,105 words)
Bibliography Sources: 1+

SAMPLE TEXT:

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]


Accounting This Discussion Contains Research Term Paper

Term Paper  |  4 pages (1,089 words)
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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]


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]


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 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]


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 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]


Future of Accounting the Business Term Paper

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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]


Government Accounting Office in America Term Paper

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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]


SEC Internet Exercise - Kmart Term Paper

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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]


Regulating the Accounting Industry Term Paper

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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]


Cost Accounting for Possible Rental Research Paper

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Accounting -- Corporate Finance - Costing

Five pilots, each owning 20% of a private, not for profit "C" Corporation that owns an airplane, are considering renting the airplane to other pilots. They are calculating their monthly rates for non-rental and for rental.

If the owners not to rent out the aircraft, how would you structure the monthly fees paid by the owners?

Annual Non-Rental Costs

Variable Costs

Oil

Tires

Battery

Total Variable Costs

Fixed Costs

Plane depreciation

Annual maintenance

Altimeter check

Annual State cert.

Insurance

Hangar fees

Filters, hoses, misc.

Annual Reserve Contribution

Total Fixed Costs

Total Costs

$30,103.33

Each pilot pays for his/her own fuel immediately after flying, so fuel costs are excluded. The propeller portion is somewhat confusing: at one point, it says it will be replaced in 40 hours; at another point, it says it has 1,000 hours of life left. I went with the 1,000 hours of life left. I would also have each pilot contribute $2,000 per year to an annual reserve fund to cover extraordinary costs. Yearly contribution by each of 5 pilots should be $6,020.67 per year; monthly fee…… [read more]


Evaluation of Accounting Questions Term Paper

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Resource Structure Analysis

The statistics indicate that in the five-year period Kimberly-Clark has had a greater workforce than those employed by SCA. However, one of the key point to note are, in the past year, SCA had a considerable increase in its workforce with an increase of 10,243 employees over last year. This is in contrast to Kimberly-Clark as in… [read more]


Accounting Ethics Essay

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Plant Assets Ethics

I do not agree with the supervisor about the depreciation. The point of depreciation is so that the accounting for a major purchase is spread out over the useful life of the asset. If the expected useful life of the machine is five years, that is the time over which the purchase should be depreciated. Further, it is nonsensical to change the expected life of an asset mid-stream. If prior years it had been depreciated on a five-year schedule, that schedule has to be maintained. Whether the asset has been paid for or not is irrelevant, as this is accrual accounting, not cash accounting.

This is not to speak of the motivation for changing the depreciation. Manipulating depreciation terms as a means of manipulating earnings is outright accounting fraud, and therefore illegal. It also runs against every code of ethics for any professional organization in the accounting profession.

I will absolutely not be changing the depreciation, nor will I change the expense transfers. These changes are being done with the specific purpose of manipulating earnings, which is an illegal act. It is also a violation of pretty much any ethical code in the accounting business. Management is also behaving in an unethical manner by even asking me to do this. The controller is presumably some sort of licensed accountant, and if the controller has truly asked for this change, that would be a breach of ethical duty on the part of the controller. If I have any tangible evidence of this request, I would be obligated to report this conduct to the body with which the controller has membership, as it doubtless violates their ethical code of conduct.

3. The proper treatment of repairs and maintenance is that they are to be expensed. They are not added to capital assets, nor do they change the value of the pre-existing capital assets. If the repairs are done to extend the life of an asset, they can be recorded as a capital expense. However, that clearly is not the case here, because…… [read more]


Audit Implications of Going Public Essay

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SOX & PCAOB #5

The author of this report has been given a hypothetical situation where a CEO by the name of Terry Puckett is asking the impacts of two major regulations or laws pertaining to public companies and the auditing standards that they must adhere to. The first of those two is the Auditing Standard No. 5 as offered… [read more]


Quiz About Auditing Practices Essay

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Auditing

The only similarity between fraudulent financial reporting and misappropriation of assets is that they both result in financial statements that do not accurately reflect the financial condition of the company. Misappropriation of assets is literally senior managers taking assets. According to Price Waterhouse Coopers (2015), intellectual property is the most commonly-misappropriated asset. Fraudulent financial reporting is not the taking of an asset, but misreporting on financial statements. They may sometimes be related to each other, but the two actions are not the same at all.

There are three fundamental conditions for the commission of fraud. These are that there needs to be some sort of motivation -- greed is good enough; opportunity, and rationalization. Arguably, the latter part is not necessary -- accepting that one wants to commit the act is enough in terms of convincing someone to do it. Rationalization does not always occur when someone does something illegal. As for examples, there is no real need to overthink motivation here. People like money and want more of it; they have a chance to take some and get away with it; and what they have to say about it afterwards is not all that important at that point. They might rationalize it, but they might not; a sociopath would not bother with the rationalization stage. Senior officers are typically those in the best position to commit fraud because they have access to, and control of, assets.

C. Auditors can do a few things with respect to fraud risk. The first thing is that the auditors need to discuss this risk with the other members of the fraud team. This is as per SAS 99, and it provides the auditors with an opportunity to ensure that the entire team is aware of the risk and on the alert for more evidence pertaining to risk or potential fraud (Ramos, 2003). They have a duty to report this risk to the company that they…… [read more]


Creating a Universal Standard for Accounting and Finance Research Paper

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¶ … Long-Term Impacts of IFRS and GAAP Convergence?

In the world of accounting, there has been a focus on creating a workable standard for firms to utilize around the world. This is taking place based upon the need for greater amounts of transparency and reporting. To determine the overall scope of what is happening requires carefully examining the convergence… [read more]


Inventory Accounting Using FIFO and LIFO Research Paper

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FIFO and LIFO

Using FIFO (first in, first out), the assumption is that the first thing purchased will be the first thin used. Thus, the oldest item will be used:

FIFO

Price

Out

Remaining

Total

The total inventory value on the balance sheet at present is therefore $13,600, which is $2,100 in the 100 units at $21, and 500 at $23.

Using LIFO, last in first out, the assumption is that the newest inventory is the one that is used. Thus, under LIFO the inventory value will be as follows:

LIFO

Price

Out

Remaining

Total

So the remaining inventory on the balance sheet using LIFO is $10,800. This is because where under FIFO the remaining inventory is mostly from the newest delivery, under LIFO the remaining inventory is mostly from the oldest delivery.

The biggest disadvantage of LIFO is that if a company carries inventory perpetually, then it will be on the books only as the oldest, regardless of whether that is correct or not. Moreover, the inventory will be undervalued on the balance sheet, because it will reflect years-old pricing. An adjustment may be required. For this reason, LIFO is not allowable under IFRS, though it remains acceptable under GAAP. So LIFO is something that is maybe less accurate.

FIFO may be more accurate, in that it more closely reflects who inventory should be valued. The balance sheet valuation of the inventory under FIFO is more accurate, and will move over time. For this reasons, FIFO is more…… [read more]


Cbu Installed a Computer System Essay

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It is unlikely that one could find evidence in the Bible to support the perspective of accountant A.

Thus, there is probably more validity to the thoughts and considerations of accountant B. On this particular subject. Due to the timing in which the inventory error was received, CBU made a host of faulty decisions based on erroneous data through the year. Accountant B. realized this fact, in addition to the considerable implications of it. The vast majority of business that CPU conducted based on the tallies of its inventories was likely flawed, meaning the company was likely incurring higher costs than it needed to. During these crucial time periods with uncertain currencies and economic climates, such mistakes are not feasible -- especially not realizing them 12 months later. Therefore, it is quite true that accountant B. is right when she stated that the controls that are in place at CBU need to be more timely; the company simply cannot afford to let so much time go by with such an influential error.

The policies or procedures that this particular organization should implement in order to avoid future situations like this one from occurring again are to simply conduct audits more regularly. Doing so will not only provide more time to find any errors, but it will also enable to company to fix them in a manner that is substantially more forthright than that selected by Accountant A. The more time there is to find such errors, the more time that CBU can spend correcting them in a manner that is conducive of honest business. The company should consider conducting audits no less than monthly. If it finds that there are still errors and that its physical inventory is not matching the value for it on its computing system, it might need to conduct such audits fortnightly or perhaps adopt a different computing system to monitor the pecuniary…… [read more]


Sarbanes-Oxley Act : 2002 Research Paper

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There is no sign that these second associate opinions provided any assistance in avoiding audit failure. In the same way, the traditional audit failures of previous times cannot be linked with deficiencies in inner management. The best inner management system can easily be rendered worthless by top management frauds and collusion. The underlying causes of failed audits are more correctly linked with gross offenses of audit techniques rather than two deficiencies in management's inner control framework (Fletcher & Plette, 2008).

While taking into account the regulating factors of the SOA, I was hit by the precautionary characteristic of this Act. PCAOB examinations of public auditors, development and administration of strict audit requirements and the powerful separation between the consulting and auditing functions of accounting organizations all functions to deter the accounting-related business meltdowns experienced by companies like Enron. It seems that all control can be separated into two categories: precautionary or remedial Workers' settlement is an example of remedial government control. It provides a solution after the damage has happened. This was an enhancement over the past scenario in which the harmed employee was not likely to be able to restore at law for his/her damages. Workers' settlement, with its provision of no-fault, assured that a harmed employee would be completely protected with respect to healthcare costs and would get a limited salary loss settlement, so long as the damage occurred out of the job (De & Argosy University, 2006).

The legislature identified that an excellent remedy to the issue of industrial accidents is to prevent them from occurring. OSHA uses this precautionary strategy. Accidents are avoided by mandating safety requirements and examinations. This was a complete reversal of viewpoint from workers' settlement, which considered industrial accidents as unavoidable and merely desired to improve the financial effect of victims. All regulating techniques contain components that are either precautionary of remedial, or perhaps a mixture of both. For example, the SOX Act is primarily remedial, in that it provides solutions to investors who suffer loss from fraud and misunderstanding. It is also precautionary in that it also requires comprehensive regular disclosure of financial data so that investors can avoid losses culminating from investments with poor or insufficient financial basic principles.

Conclusion

By stiffening charges on business managers, the Act makes life easier for accounting firms because business managers will be less likely to push them to sign off on doubtful fiscal reports. Along with modifying the connection between the auditor and the customer, the Act may help recover investor confidence. The issue of conflicting auditor interests who review and provide non-audit services to the same customer has been seriously reduced. Presumably, this helps remove the tendency of auditors to be less doubtful about the finances of the company for worry of losing profitable non-audit services.

References

De, L., & Argosy University. (2006). The Effectiveness of the Sarbanes-Oxley Act of 2002 in preventing and detecting fraud in financial statements: A dissertation. Boca Raton: *****.

Fletcher, W.H., & Plette, T.N. (2008). The Sarbanes-Oxley… [read more]


Supplied in Chapter 25 Assessment

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Before offering two preferable methods of bookkeeping classified as the checkbook method and the cash-basis method, the three step process of bookkeeping systems are introduced to give some need background information on the idea.

The three steps discussed by the author include first, recording each transaction in a manner that is uniform and systematic. The next step is described as being able to adequately summarize the transactions in an ordered and grouped form that can be logically and rationally analyzed for future use. The final step in bookkeeping includes having the ability to prepare the data and information gathered into a summary form that can be explained and measured by those not professionally trained in the art and science of accounting.

The remainder of the chapter compares and contrasts the two accepted methods of bookkeeping known as the checkbook method and the cash basis method. The checkbook method is explained as a simpler approach that is recommended for smaller and less complex organizations. The method is explained as balancing a personal checkbook, but on an organizational level. This method may be done manually or can be done by computer but all information in this approach is gathered on a checkbook and manipulated in that format.

The cash basis system is the more preferred method of bookkeeping for larger and more complex organizations. The authors described this system as being a more formal version of the checkbook method with more ways of describing and presenting the information contained within the records. Essentially what is most important is that bookkeeping methods are aligned with the overall strategic outlook of the organization to ensure that a compliant system can…… [read more]


Ethical Standards in Accounting Term Paper

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Ethics has become a major component of professional orientation for accountants in light of the increased globalization of business.

Development of a Common Set of Ethical Standards:

Given the need to establish a global set of ethical standards in accounting, several countries and regulatory systems have undertaken measures to address the issue. The United States and the international community have played a crucial role in addressing this issue mainly because of the need to prevent incidences of unethical accounting scandals. The international community has developed a framework for global ethics through the International Federation of Accountants (IFAC), which was instituted to serve public interest and foster global accountancy profession. The International Ethics Standards Board for Accountants (IESBA) was also established and publicized ethical standards based on the principles of professional competence and behavior, integrity, confidentiality, objectivity, and due care.

On the other hand, the United States has undertaken measures to converge IASB and FASB as part of ensuring that the country adopts a global set of ethical standards. Together with the international community, the country has helped developed the ethics education framework, which has four major objectives. This framework seeks to create a sense of ethical responsibility, enhance moral standards and attitudes, create problem-solving skills with ethical implications, and create a sense of professional responsibility (Sadowski & Thomas, 2012, p.17). Moreover, the United States and the international community have created publications for international oversight mechanism.

However, in the process of developing a global set of ethical standards, the United States and the international community have experienced several challenges that have hindered the effectiveness of their plans. One of these challenges include the fact that some countries or regulatory systems are yet to adopt or converge global accounting standards, which make it difficult to enforce these ethical standards. The other challenges include the complexity in developing accounting standards, complex financial reporting infrastructures, and the need for overarching reforms in many countries.

In conclusion, the need for a global set of ethical standards has been influenced by efforts towards a global set of accounting standards due to technological developments and globalization. This need has attracted significant attention from the United States and the international community that have undertaken various measures to address it. However, these regulatory systems have faced numerous challenges including complexity of these standards.

References:

Irvine, H.J. & Lucas, N. (2006). The Globalization of Accounting Standards: the Case of the United Arab Emirates. Retrieved from University of Wollongong website: http://ro.uow.edu.au/cgi/viewcontent.cgi?article=1229&context=commpapers&sei-redir=1&referer=http%3A%2F%2Fwww.google.com%2Furl%3Fsa%3Dt%26rct%3Dj%26q%3DGlobalization%2520In%2520Accounting%2520Ethics%26source%3Dweb%26cd%3D3%26cad%3Drja%26uact%3D8%26ved%3D0CFMQFjAC%26url%3Dhttp%253A%252F%252Fro.uow.edu.au%252Fcgi%252Fviewcontent.cgi%253Farticle%253D1229%2526context%253Dcommpapers%26ei%3DWQ6eU4-XBurP0AXmk4GoCA%26usg%3DAFQjCNF8Zxzh3UMvhc3DfwvqGmW5tfYyyg%26sig2%3DF5VJBDVvbtoEtcf-Qrd_8g%26bvm%3Dbv.68911936%2Cd.d2k

Mitchem, C.E. (2009, January). Analysis of International Ethical Standards in Accounting.

International Business & Economics Research Journal, 8(1), 41-50. Retrieved June 15, 2014, from http://journals.cluteonline.com/index.php/IBER/article/download/3086/3134

Sadowski, S.T. & Thomas, J.R. (2012, May). Toward a Convergence of Global Ethics Standards:

A Model from the Professional Field of Accountancy. International Journal of Business and Social Science, 3(9), 14-20. Retrieved June 15, 2014, from http://ijbssnet.com/journals/Vol_3_No_9_May_2012/3.pdf… [read more]


Cross Examine the Accounting Fraud Research Paper

Research Paper  |  4 pages (1,237 words)
Bibliography Sources: 1+

SAMPLE TEXT:

Through this one is able to tell that the company deliberately failed to disclose the material facts that were very essential for the reported huge earnings hence resorting to the unusual accounting treatment and business practices that do not give the actual picture of the financial health of the company (Comer, M. 2003). Investors and stakeholders are also deceived when you consider the fact the company was facing a stiff competition in the market with the declining margins all across the continent.

The scandal that involved Xerox corporation laws approximated to be over $6 billion in revenue that led to an overstatement of earning close to $2 billion (Gara, D. 2004). This was discovered when the Securities and Exchange Commission stated to investigate the producer of copier and other related services which accounted for the manipulation. The amount that was involved was estimated to half of what is now stated (Coenen, T. 2008).

Xerox corporation was having a better than expected restatement results, they also lost close to 13% in the midday trading. Looking closely this was much less than the 35% decline that they incurred in the office equipment stock just hours before trading closed on Friday. According to the reports from the audit, the fresh accounts proved that there were problems in 2001. The filling of the 2001 10-K will have help in resolving the company's accounting issues (Gara, D. 2004). Despite all this problems that were taking place at the company, other problems emerged. The downgraded Xerox shares showed that the short-term sell and long-term neutral ratings were not balanced (Comer, M. 2003). With this entire taking place, the investors, stakeholders and the general public uncover the fraud that was taking places at Xerox Corporation.

There was allegation that the accounting actions and accounting opportunities were expected to meet or exceed Wall Street expectations, thus disguising the true operating performance from the investors (Coenen, T. 2008). This was not the case in Xerox Corporation; these actions by the company violated the general accepted accounting principle. Hosting of undisclosed accounting action by the Xerox Corporation in its bid to report equipment revenues and profit had an enormous impact on the company's performance. According to the expectation of the market Xerox would have fallen by a wider margin following its earlier actual reports.

After agreeing to pay a $10 million fine in settling the fraud case, it is believed that Xerox would have paid the largest fine. The Securities and Exchange Commission came with a conclusion that that the profits that were recognized by Xerox were too early to lease (Gara, D. 2004). Xerox confirmed this by stating that close $2 billion in revenue was involved in the operation but they did not clarify how much profit was obtained or moved around due to that settlement (Comer, M. 2003). There high ranked officials of Xerox Corporation were also found to be guilty of manipulation.

Conclusion

The possible outcome for this circumstance would be the dismissal of the high ranked… [read more]


Reforms of Auditor Standards Research Paper

Research Paper  |  7 pages (3,206 words)
Style: Harvard  |  Bibliography Sources: 13

SAMPLE TEXT:

" Allen states that the HIH board depended on independent actuary reports and its auditor assessments of those reports but that the reports were never tabled at the audit committee or board meetings and there was never an actuary who was asked to be at the meetings to provide explanations for those reports or to answer any questions that might… [read more]


Segregation of Duty the Enron Research Paper

Research Paper  |  8 pages (2,524 words)
Bibliography Sources: 8

SAMPLE TEXT:

Segregation of Duty

The Enron Corporation scandal led to its bankruptcy and the dissolution of the Arthur Anderson corporation; a leading accountancy and audit partner worldwide. Besides being the largest bankruptcy case in the history of America, Enron is still viewed as the biggest audit failure (Mesa & Financial Executives Research Foundation, 2012). Although it is the most well-known U.S.… [read more]


Five-Year Development Plan. My Career Essay

Essay  |  4 pages (1,235 words)
Bibliography Sources: 3

SAMPLE TEXT:

More importantly, I have developed methodical skills that assist me to implement logical thinking and attention to solve a problem.

I have also acquired a substantial knowledge in financial accounting, management accounting, cost accounting and quantitative analysis with years of accounting study. Although, I am currently not working, however I intend to enter into further training to improve my skills to prepare me for a brilliant career in accounting profession.

e. "Job satisfaction attributes"

My job satisfaction attributes are to be autonomy and independence in my place of work. Moreover, I will derive higher satisfaction if the compensations received from my place of work are high. Typically, I expect to receive higher salary for the work done. The higher compensation will make me to derive more satisfaction from my work. I will derive more satisfaction if I feel safe in my work. More importantly, career development is very important for me, and organizations that could improve my career through training and development will be my first target.

Dessler, (2009) argues that training and employees' development is very critical to enhance organization efficiency. Typically, training will enhance the skills and competence of employees, which will assist organizations to achieve competitive market advantages.

f. Identification of Three Action steps to reaching stated career goals and Objectives

The three action steps that I have been taken to reach my stated career goals are as follows:

First, I have been working towards achieving 2.1 or first class grade when I finish my university education. My present cumulative grade is 2.1, and I will continue to improve on my study to reach first class position when I finish my first degree.

Moreover, I have registered for the ACCA professional accounting exam and I will take the exam after my first degree. I believe that I will be a qualified chattered accountant first year after my graduation. Finally, I have started taking accounting training classes during the long vacation. The strategies are to reach my career goals and objectives.

g. "Identification of Potential Barriers to Reaching Stated Career Goals"

The current state of the economy is the potential barrier to my career goals. The fall in the state of the economy might increase unemployment rates in the country, which might serve as a barrier to secure the employment in the accounting profession. Moreover, high cost of study especially the cost of MBA program could serve as a barrier to my career goal. After my first degree, I intend to pursue master degree to acquire MBA in one of the top universities in the United States. However, the costs of running the MBA program are currently enormous in the United States. The top MBA colleges in the United States charge as high as $50,000 as tuition fee only.

h. "Analysis the Effect of Career Training Programs"

Junni, et al. (2008) argue that career training program have the causal effect on human capital because the training increases the efficiency of human capital. The report carried out by Employment… [read more]


Loss Contingency a Transaction Case Study

Case Study  |  2 pages (665 words)
Bibliography Sources: 2

SAMPLE TEXT:

" Even though company M. was eventually exonerated, the reported liability for December 31, 2007 should remain the same at $17 million.

Question 2

Under the FASB two requirements are needed to report a loss contingency. One is that the determining the likelihood of the event to occur, in this case that Company M. is found liable, and the information can be determined about the loss. To help make this clearer, the U.S. GAAP suggests that a liability should be recognized if it is probable that an outflow of resources will be required to settle the obligation. This is true in company M's case. Also The amount of the obligation can be easily estimated and used to gather a rough idea of what was lost money-wise. Once again this is true in company M's case. The GAAP uses the 70% chance of happening benchmark for it to be likely, this seems appropriate in this case. To sum up this problem, and using these standards set in the FASB, it is the right thing to do for company M. not to adjust its liability for 2009. There appears to be no serious degradation of the FASB standards if they decided to proceed in this manner.

Question 3

A company should only record the reduction of the previously recorded loss when the standards of the FASB are satisfactorily met. Although the timing of the appeals creates some troubles with the accounting of this company and its financial profile, it is well within the law to take advantage of their unfounded judgment that was eventually appealed and overturned. According to the FASB it is necessary for Company M. To record the loss contingency after the Court of Appeals has overturned the jury's verdict in 2011.

References

Financial Accounting Standards Board. "Accounting Standards Codification." Viewed 17 Sep 2013. Retrieved from https://asc.fasb.org/section&trid=2127165&analyticsAssetName=subtopic_page_section &nav_type=subtopic_page

Nilsen, K. (2011). Renewed Focus on Loss Contingency Disclosures. Journal of Accountancy April 2011. Retrieved from http://www.journalofaccountancy.com/Issues/2011/Apr/20113854.htm… [read more]


Finance Management (Discussion Questions) Essay

Essay  |  3 pages (1,103 words)
Bibliography Sources: 4

SAMPLE TEXT:

Revenues on the other hand are the benefits (in monetary terms) a business receives due to the conduct of its operations, i.e. sale of goods and services.

Third Student

The key point of divergence with regard to the accrual basis and cash accounting basis is the timing or point at which some specific transactions are recorded (Fishman, 2013). When it comes to the cash method, income according to Fishman (2013) "is not counted until cash (or a check) is actually received, and expenses are not counted until they are actually paid." On the other hand, income in the case of the accrual method as Fishman (2013) further points out is counted on the occurrence of a sale. Expenses according to the author are in this case counted on the receipt of the goods and services.

Some of the major reasons for accrual accounting include but they are not limited to the need to match revenues with expenses. The utilization of accruals accounting permits businesses to have a more enhanced picture of expenses and income, and by extension, a better picture of profitability.

Revenues for all intents and purposes are the fees a business earns for the provision of services or for the supply of merchandise. Expenses on the other hand are the various costs that a business incurs in an attempt to generate revenues.

Part B

Reflect on what you have learned from this question and include at least 1 reference either peer-reviewed or the text book.

From this exercise, I have learnt that the accrual basis is more appropriate in some instances than the cash basis of accounting. This is more so the case given that financial transactions are in this case recorded when they take place and not necessarily when cash happens to changes hands. This approach facilitates or permits the creation of a flow/basis for the matching principle. According to Goyal (2007), the relevance of the marching principle cannot be overstated when it comes to the ascertainment of the correct income (profit) amount. Warren (2012), who happens to be in agreement with Goyal, caps it all with his assertion that "accrual accounting is a better predictor of the profitability of a company than is net cash flows from operating activities and the cash basis of accounting" (p. 104).

From this exercise, I have also learnt that in comparison to the cash basis of accounting, the accrual method happens to be somewhat more complicated. This is more so the case given that it calls for the utilization of reconciliations as well as journal entries in an attempt to ensure that the recording of financial statements is done properly. It should however be noted that although many businesses make use of the accrual accounting approach, the best method of accounting is largely dependent on such things as the size of a business.

References

Fishman, S. (2013). Cash vs. Accrual Accounting. Retrieved from http://www.nolo.com/legal-encyclopedia/cash-vs.-accrual-accounting-29513.html

Goyal, V.K. (2007). Financial Accounting (2nd ed.). New Delhi: Excel Books.

Investopedia. (2013). Investopedia. Retrieved from… [read more]


International Financial Reporting Term Paper

Term Paper  |  15 pages (4,579 words)
Bibliography Sources: 12

SAMPLE TEXT:

International Financial Reporting Standards (IFRS) can be described as a set of global accounting standards that show how specific kinds of transactions and other events should be presented in financial statements. These set of international accounting standards are issued by the International Accounting Standards Board. Notably, the International Financial Reporting Standards act as replacement of International Accounting Standards that were… [read more]


How a School Budget Is Designed Essay

Essay  |  5 pages (1,488 words)
Bibliography Sources: 3

SAMPLE TEXT:

¶ … School Budget Is Designed

The Trenton Public Schools are the New Jersey comprehensive community public school District that serves students in pre-kindergarten. In Mercer County in New Jersey, the Trenton public school consists of 16 elementary schools, two middle schools as well as the high schools. The district is one of the 31 Abbott districts in the New… [read more]


AT&ampT Is in Basic Terms Term Paper

Term Paper  |  4 pages (1,498 words)
Bibliography Sources: 4

SAMPLE TEXT:

Table 1: AT&T's Financial Ratios

Financial Ratio

2012

2011

Liquidity Ratios

Current ratio

0.71

0.74

Quick ratio

0.71

0.74

Cash ratio

0.15

0.10

Profitability ratios

Gross profit margin

0.57

0.57

Return on equity

0.08

0.04

Return on assets

0.03

0.01

Solvency Ratios

Debt to equity ratio

1.95

1.56

Debt ratio

0.66

0.61

Proprietary ratio

0.34

0.39

AT&T Ratio Analysis

Based… [read more]


Ethical Issue in Financial Markets Term Paper

Term Paper  |  4 pages (1,173 words)
Bibliography Sources: 4

SAMPLE TEXT:

Ethical Issue in Financial Market: Lehmann Brothers and Repo 105

In 2007 and 2008 Lehmann Brothers employed an accounting method called Repo 105 which enabled the firm to hide billions of dollars in unprofitable assets from public scrutiny. The financial institution was able to accomplish this sleight of hand by selling packages of Treasury bonds, Eurobonds, mortgages, and other bad investments at the end of an accounting quarter to offshore financial institutions in the Cayman Islands with the understanding that within a few weeks they would reacquire them. Basically it worked this way, imagine you want a loan to buy a car but you've maxed out several credit cards. On the day before a loan examiner checks your credit, you hide all of your credit card debt under a fictitious person's name, making your credit report look good to the loan examiner. Once you have secured approval for the loan you reassume your debts (Sharp).

This accounting practice enabled Lehmann Brothers to report financial statements that enhanced the company's appearance of solvency while simultaneously concealing approximately $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 of toxic assets. In September of 2008 the company declared bankruptcy.

Firms move transactions off their balance sheet for legitimate reasons all the time. This business practice is commonly employed by banks who record these off-balance-sheet transactions as loans in their books. However, when a company moves a transaction off their balance sheet accounting regulations need to be followed in order to make clear where and why the entry was moved to investors and other interested parties. By recording these transactions as sales on their books Lehmann Brothers created the misconception that the company held more cash assets and was exposed to less liability. This made the company's balance sheet look better to investors and more importantly rating agencies. Many speculate the company felt if word of their true financial position became public and the company was downgraded the possibility of securing new investors or loans would be gravely impaired. It appears Lehmann Brothers hid this accounting practice not only from the investing public, rating agencies, and government regulators, but also from their own board of directors (Ahrens).

Discussion

During Lehman's 2008 earnings calls, in which it touted its leverage reduction, analysts questioned the means by which the firm was accomplishing this achievement. Company officials reported Lehmann was reducing its leverage through the sale of less liquid asset categories and simultaneously claimed they were trying to give the group a great amount of transparency on the balance sheet. They said nothing about the firm's use of Repo 105 transactions.

One could make a serious argument that Lehman Brothers actions were both unethical and unprofessional. According to the CFA Institute Code of Ethics and Standards of Professional Conduct members must "act with integrity, competence diligence respect, and in an ethical manner with the public, clients, prospective clients, employers, employees, colleagues… [read more]


Economic Globalization Essay

Essay  |  2 pages (681 words)
Bibliography Sources: 1+

SAMPLE TEXT:

However, international adoption of IFRS or convergence based upon a system emphasizing principles-based accounting standards means that there must be some common agreement as to what constitutes the principles by which all companies should abide.

Q4. "There will be problems. There will be situations in which it seems that existing IFRSs do not consider or cover a particular situation that may be important in the country of adoption. Successful jurisdictions build a mechanism for identifying those cases and bringing them to a group charged with addressing them" (Upton 2010). An institutional framework must be created for the challenges of shifting to a new system to which practitioners can appeal regarding any ambiguities about changing policies.

Q5. Implementation of IFRS without the requisite infrastructure will result in confusion for both shareholders and organizations. Substantial differences remain between IFRS and GAAP. Particularly given that GAAP is far more detailed, there must be available advice to firms on how to restructure their accounting and deal with what will likely seem like a new, ambiguous system in the form of IFRS. However, "while convergence may be the necessary preparation for some countries to adopt IFRSs, the simplest, least costly and most straightforward approach is to adopt the complete body of IFRSs in a single step rather than opting for long-term convergence" (Upton 2010). GAAP as we know it will likely no longer exist in the upcoming decade and given the number of countries using IFRS, a long-term convergence strategy is likely to be overly costly -- and the final product would likely resemble IFRS anyway, given its ubiquity outside the United States.

References

Benjamin, Michael. (2012). IFRS convergence: What it means and where it stands. BPM.

Retrieved:

http://www.bpmcpa.com/Library/IFRS-Convergence-Update-Feb-2012.asp#.UT_JkFesf5N

Schneider, Bob. (2013). Accounting basics. Investopedia. Retrieved:

http://www.investopedia.com/university/accounting/accounting6.asp#axzz2NNQt7MiE

Upton, Wayne. (2010). Adopt, adapt, converge? IFRS. Retrieved:

http://www.ifrs.org/news/features/Pages/adopt-adapt-converge.aspx… [read more]


Accounting Court Case Brief-Federal Tax Case Study

Case Study  |  2 pages (592 words)
Bibliography Sources: 0

SAMPLE TEXT:

Pierre's personal income tax returns. Just when and to what extent St. Pierre understood her obligations and the tax consequences were disputed at trial.

ISSUES

1. Did the court limit St. Pierre's opportunity to introduce expert testimony as to the standard of care owed to St. Pierre by her accountants, specifically, that her accountants erred in failing to ask her about company income not deposited in company accounts?

2. Did the unduly limit St. Pierre's cross-examination of the government witnesses against her?

CONCLUSION

1. No

2. No

ANALYSIS

The appellate court found that the district court properly applied Fed. R. Evid. 403 in supporting the government's opposition to expert testimony offered by the taxpayer as to the standard of care owed to her by her accountants. The government's evidence permitted the jury to find that the taxpayer, in diverting company income to personal ends but not reporting it as income to the company or herself, acted against warnings. They also found that she had used personal accounts not unveiled to her accountants, that the gauge of the diversion was vast, that her accountants were uninformed of most of what was occurring and that the taxpayer herself fashioned false documents to cover her tracks. By contrast, the taxpayer's proposed accounting standards evidence, by shifting the focus to whether the accountants were doing a good job, had a prospective to confuse and mislead the jury because her accountants' failure to prevent the fraud would not be a defense. The court did not unduly limit the taxpayer's cross-examination of the government's witnesses. Her proposed cross-examination of an IRS agent would have done little to propose either prejudice or…… [read more]


Ethical Issues Affecting Accountants Research Paper

Research Paper  |  3 pages (929 words)
Bibliography Sources: 3

SAMPLE TEXT:

50). In other words, the accountants have been able to basically "comply" with technical rules, but while doing so they have learned to "…camouflage problems at reporting entities" until those problems become "so large that the entity itself is swallowed up by them" (Spalding, 50).

What is truly needed, Spalding insists, is for the accounting industry in the U.S. To "improve its ethical standards" by conforming to the international Code of Ethics for Professional Accountants (50). This is suggested because some of the rules set out by the American Institute of Certified Public Accountants (AICPA) are "poorly drafted" and the basic concept of "honesty" is "clumsily addressed" (Spalding, 51).

One of those "clumsily addressed" concepts is Rule 102, "Integrity and Objectivity," Spalding explains on page 51. This rule asks AICPA members to be "…free of conflicts of interest" and yet Spalding insists that accountants "face conflicts of interests nearly every day of their working lives" (51). Because of the vagueness of Rule 102, which also demands that AICPA members must "…not knowingly misrepresent facts," accountants still can bend the rules to fit their clients' fiscal restraints or goals (Spalding, 51).

Notwithstanding Rule 102, accountants can still manipulate the system, the author believes, because deceit and dishonesty are not restricted to "outright lies"; this rule leaves it wide open for members to mislead others by "…omission, deliberate vagueness, circumlocution, or purposeful efforts to confuse without outright misrepresentation" (Spalding, 51). Hence, ethical standards are needed so crafty and deceitful practices cannot be acceptable.

When it comes to the lack of ethical practices in corporate America, fingers should be pointing at business schools, according to Robert Bruner, dean of the Darden School of Business at the University of Virginia (Adams, 2010, p. 86). Indeed there is an urgent need to incorporate ethics into the accounting curriculum, according Barbara Adams, in the Business Education Innovation Journal. Business schools should be helping build not only the "competency and skills of students" but those schools should also "…instill in them a sense of ethics and moral obligation," Adams asserts. Hence, the author senses that faculty at "many colleges and universities" are exploring "meaningful ways" to bring ethics into the curriculum (86).

In conclusion, it is not easy to change a corporate culture, and that has been proven to be true even after the Enron and WorldCom disasters. But through the establishment of ethical codes and principles -- and with corporate managers insisting that strict ethical guidelines are followed religiously -- the industry can become a place were moral values thrive.

Works Cited

Adams, Barbara L. (2010). Using Game-Based Learning to Raise the Ethical Awareness of Accounting Students. Business Education Innovation Journal, 2(2), 86-93.

Bolt-Lee, Cynthia E., and Moody, Janette. (2010). Highlights…… [read more]


Internal Control Case Study

Case Study  |  3 pages (924 words)
Bibliography Sources: 3

SAMPLE TEXT:

By purchasing the ink machine, the principle of applying new technological controls will have been adhered to. Lastly by calling the external auditors, LGB will be applying the principle of performing regular and independent reviews. Nevertheless, only few principles have been applied and a lot has to be adjusted.

This company has been wrong in many areas, and they need to be corrected. For example they have ignored the principle of establishing responsibilities by giving the accountant almost all the major duties in the office. They have also failed in maintaining adequate records by over working the accountant. The principle of separating record keeping and custody of assets has failed. This is because the accountant is personally handling everything and it is wrong. There is also the principle of dividing responsibility for related transactions that has not been applied (Cosmin 2011).

The handling of cash should be separated from the record keeping of cash. The company should make sure that the receipts are promptly deposited in a bank. Cash payments should be paid through the check systems for security purposes. The cash itself should be deposited in the bank and not in the office. Cash receipts should be controlled by comparing them to the cash register. The person signing the check should be different from the one authorized and also the one keeping records. All these are precautions to fraud. The document flow should also be monitored making sure that all concerned officials get to check them. A petty cash journal can be made to control the cash flow too.

Conclusion

LJB company seems to have had more left out principles that the applied ones. This calls for urgent external audit before the company goes public. The purposes of the internal control would help the company control its assets. This would also ensure reliable accounting and promote efficient operations. With all these integrated, the public would be willing to be partners with the company. For a company to pass this test, all principles should be applied which include, setting up responsibilities, preserving adequate records, indemnifying assets and bonding employees, unraveling record keeping from custody of assets and dividing responsibilities on related transactions. Lastly it is important to apply new technological controls and often perform reviews. With all these controls LJB Company's president will succeed in floating its company to the markets.

References

Cosmin, D.E. (2011) Enhancing Assets' Protection Through An Adequate Monitoring Of Internal Control system By Internal Audit. Annals of the University of Oradea, Economic Science Series, Vol. 20 Issue 2, p491-497. 7p

Muzorewa, Susan; Rao, Arundhati. (2012). Sales Order Processing and Internal Controls. Journal of the International Academy for Case Studies, Vol. 18 Issue 2, p53-65. 13p.

Tysiac, K. (2012).…… [read more]


Adaptive Practices: Global Economy Research Paper

Research Paper  |  3 pages (1,068 words)
Bibliography Sources: 3

SAMPLE TEXT:

That can help companies decide if they want to merge with one another, or if one company wants to acquire another. It can also help companies determine where they stand when it comes to other companies of the same or similar size and in the same or similar industry. Good financial health is very important for any company, but there is more to that financial health than just the balance sheet. It is also important to determine how the company is doing in relationship to other companies, because that can also be a good indicator of whether the business is moving in the right direction or whether there are changes that can and should be made in order to improve the company's future.

One global set of accounting standards is the right choice. There will be those who disagree, of course, but it is difficult for companies to work together on a global level when the way they deal with their accounting is very different. In order to foster good relations between companies throughout the world, accounting transparency and accuracy are highly significant (International, 2007). But there is more than just accuracy and transparency that have to be considered. In short, a company can be just as accurate and transparent as possible and still not provide another company (or a regulator) with needed information if the accounting standards of that company's country are very different. In the past that would not have mattered very much, but now that so many companies are doing business across the world it has become more important that they are able to do so with standards that apply to all companies no matter where they are located or doing business.

The IFRS works well because it requires a statement of financial position, along with both income and comprehensive income statements. Equity change statements and cash flow statements are also required, and they are standardized to the point that they all provide the same level and type of information. Naturally, that is good news for regulators who examine financial documents for more than one country, and also for companies that consider mergers or acquisitions with companies that are not based in the same country. Having one global set of accounting standards makes things easier for everyone, and as the business world continues to move toward complete globalization the accounting standards are only going to make things more complicated if they are not completely globalized along with the businesses. That is something well worth considering, for anyone in the accounting or investing profession.

References

Bradshaw, M., et al. (2010). Response to the SEC's Proposed Rule- Roadmap for the Potential Use of Financial Statements Prepared in Accordance with International Financial Reporting Standards (IFRS) by U.S. Issuers. Accounting Horizons, 24(1)

Gucenme, U. & Arsoy, A.P. (2005). Changes in financial reporting in Turkey, Historical Development of Inflation Accounting 1960 -- 2005. Special Issue Accounting for the Global and the Local: The Case of Turkey. Critical Perspectives on Accounting, 20(5)

International… [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]


Current Event Presentation: "The Imprecise Article Review

Article Review  |  2 pages (695 words)
Bibliography Sources: 1+

SAMPLE TEXT:

CFO. Retrieved:

http://www3.cfo.com/article/2012/6/gaap-ifrs_hans-hoogervorst-iasb-fasb-gaap-ifrs-oci-facebook-amsterdam?currpage=2

Current event presentation: "Health-care fraud: Following the paper trail"

Health care fraud has become an epidemic, and auditors are often the first line of defense against unethical practices. The complex nature of healthcare auditing is often at the root of the problem. If there are multiple billings from the same provider or two providers are billing from the same patient, the paperwork can be difficult to decipher. Manipulating statistics by inflating cost are common, along with outright embezzlement and misappropriation-of-funds. Medical equipment makers may inflate their eligibility for reimbursements and auditors have been historically slow to catch such fraud. According to Kathleen Hoffelder, checking the accounts-payable records of benefit plan is an essential component of an audit of a healthcare entity.

It should be noted that not all problems on the balance sheet are intentional acts of deception. The staff accountant or staff clinician may be genuinely ignorant of auditing requirements and make errors. The recession has caused many organizations to downsize and only deploy a skeleton staff of overworked and under-informed employees to do bookkeeping. The process of upgrading reimbursement models can also generate conditions that are ripe for both fraud and errors.

Before an auditor makes an allegation of fraud he or she must understand the type of misstatement and why it occurred. On a more positive note, compliance departments have proliferated within organizations to keep better track of accounting procedures. However, the compliance department must have a clear chain of command through which to report any suspected misappropriation of funds. Compliance departments can be expensive, which may make many organizations, particularly small organizations, reluctant to create them. But this is why it is so essential for the auditing community to create pressure upon healthcare entities to ensure that strict compliance is seen as necessary: the ethical and financial costs to society of ignoring medical fraud or even simply sloppy record-keeping are too great.

Reference

Hoffelder, Kathleen. (2012). Health-care fraud: Following the paper trail. CFO.

Retrieved:http://www3.cfo.com/article/2012/6/budgeting_health-care-fraud-managed-care-cost-report-fraud… [read more]


Auditing Comes With Immense Responsibility Essay

Essay  |  2 pages (667 words)
Bibliography Sources: 1

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Though what defines the honesty of an auditor is difficult to elaborate exactly but the basic part involves an auditor to be honest in its dealing with the client and the audit field work performed which forms the basis of the audit opinion. Dishonesty has the consequences such as giving an inappropriate audit opinion which can harm the auditor the financial interests of the public in the company as they would not be able to see the true picture (Hall & Renner, 1991).

Objectivity is another pillar of code of ethics that requires the auditors to be unbiased, prevent conflict of interest or undue influence of others to override professional or business judgments. If an auditor is not acting objectively during his field work then he may be susceptible of any influence by the client which may lead overlooking of crucial and critical audit areas. The principle also says that the auditor must be unbiased and he should think independently of any other factor that is not in any way related to the auditing engagement he is part of.

The code of ethics ensures that the audit is being carried out by a professional auditor which is the principle of professional competence and due care. The auditor has a duty to keep himself updated with the current developments in practice, legislation and techniques. The principle ensures that the auditor involved in the client engagement possesses a particular level of skill and knowledge which would ensure that the client receives competent professional services.

The last principle of the code of ethics is of professional behavior. This is simple to say that the auditor is expected to behave in a manner that is expected from a person of his profession and should avoid any act that discredits the profession.

Therefore, the International Standard of Auditing code of ethics defines the relationship between Audit and Ethics and defines its importance.

References

Hall, W.D., & Renner, A.J. (1991). Lessons Auditors Ignore at Their Own Risk. Journal…… [read more]


Independence Between the Auditor and Client Essay

Essay  |  2 pages (491 words)
Bibliography Sources: 1

SAMPLE TEXT:

¶ … 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]


Eitf as Relates Research Paper

Research Paper  |  6 pages (1,715 words)
Bibliography Sources: 4

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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]


Organizations Establish Rules Essay

Essay  |  4 pages (1,762 words)
Bibliography Sources: 9

SAMPLE TEXT:

It would reduce costs for multinationals that must now prepare multiple books. It would also make U.S. exchanges more competitive for listings by eliminating accounting differences." So, the basic difference is that the IFRS uses a simpler standard that can be used around the world and makes accounting for companies involved in global business much more streamlined.

References

Atwood, T.J., Drake, M.S., Myers, J.N., & Myers, L.A. (2011). Do earnings reported under IFRS tell us more about future earnings and cash flows? Journal of Accounting & Public Policy, 30(4).

Crovitz, L.G. (2008). Closing the information GAAP. Wall Street Journal. Retrieved from http://online.wsj.com/article/SB122083366235408621.html?mod=hpp_us_inside_ today

Ernst & Young. (2010). U.S. GAAP vs. IFRS. Retrieved from http://www.ey.com/Publication/vwLUAssets/IFRS_vs_US_GAAP_Basics_March_ 2010/$FILE/IFRS_vs_US_GAAP_Basics_March_2010.pdf

Fowler, T., & Roper, J.C. (2005, Dec 28). Causey pleads guilty leaving just Skilling, Lay. Houston Chronicle. Retrieved from http://www.chron.com/business/enron/article/Causey-pleads-guilty-leaving-just- Skilling-Lay-1943273.php#page-2

Internal Revenue Service (IRS). (2012). Criminal enforcement. Retrieved from http://www.irs.gov/compliance/enforcement/index.html

New York Stock Exchange (NYSE). (2012). Rules & regulation. Retrieved from http://www.nyse.com/regulation/rules/1145486472038.html

Price, Waterhouse & Coopers. (2012). IFRS for SMEs: A less taxing standard? Retrieved from http://www.pwc.com/en_US/us/ifrs-tax-issues/assets/ifrs- smes.pdf

United States Securities and Exchange Commission (SEC). (2012). The investor's advocate: How The investor's advocate: How the SEC protects investors, maintains market integrity, and facilitates capital formation. Retrieved from http://www.sec.gov/about/whatwedo.shtml… [read more]


US GAAP vs. IFRS Research Paper

Research Paper  |  6 pages (2,231 words)
Bibliography Sources: 6

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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]


Transparency Essay

Essay  |  2 pages (733 words)
Bibliography Sources: 3

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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]


Accounting Method and Coca-Cola Questionnaire

Questionnaire  |  2 pages (594 words)
Bibliography Sources: 1

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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]


Hair Emporium Case Study

Case Study  |  4 pages (1,373 words)
Bibliography Sources: 2

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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]


Enron Was a Texas Term Paper

Term Paper  |  10 pages (3,997 words)
Style: APA  |  Bibliography Sources: 5

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However, as in the case of the Rhythms Hedge, the protection that the Raptors Hedge was supposed to give was more illusory than real. The reason was the same. The Raptors were not independent, creditworthy outside parties but counterparties created by Enron and LJM2. The risk was almost all borne by Enron itself. In short, Enron was trying to protect… [read more]


Accounting Standards in Use Term Paper

Term Paper  |  2 pages (653 words)
Bibliography Sources: 0

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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]


Government vs. Private Sector Discussion and Results Chapter

Discussion and Results Chapter  |  2 pages (616 words)
Bibliography Sources: 2

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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]


Roman Holiday Pizza's Treatment Essay

Essay  |  4 pages (1,273 words)
Bibliography Sources: 0

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Roman Holiday's franchise reacquisitions possess all these risks.

FRAUD TRIANGLE

The fraud triangle asserts that there are three key elements that engender fraud: opportunity, rationalization, and pressure, all of which must be present for fraud to take place. The element over which entity owners have the most control is opportunity and for this reason is the element that the system of internal controls affects most directly. In addition to weak internal controls, the opportunity for fraud is created by poor management oversight, and/or through use of one's position and authority. Roman Holiday management is aware of the issues regarding so much of their growth having come from acquisition of franchise rights and existing restaurants; knowing that analysts will be closely scrutinizing their financial statements creates pressure to perform.

Another fraud triangle element which must be considered in the Roman Holiday audit is motivation or incentive; it is a pressure or a need felt by the person who commits fraud. Roman Holiday's valuation of reacquired franchise rights is suspect because management is under considerable pressure to meet growth projections. Roman Holiday's cash flow projections cover a period of fourteen years, which could result in significant misstatement of income.

The final factor, rationalization, allows the individual who commits fraud to reconcile his or her behavior with the commonly accepted notions of decency and trust. Even though The audit manager of the Roman Holiday engagement is satisfied that there has been no reason to suspect fraudulent activity, a healthy level of professional skepticism is appropriate.

The COSO Framework

The COSO framework applies to possible controls associated with Roman Holiday's reacquired franchise rights. The Committee of Sponsoring Organizations of the Treadway Commission established a common definition of internal control and created a framework to evaluate the effectiveness of internal controls. The framework identifies the following interrelated components: Control environment, risk assessment, control activities, information and communication, and monitoring.

Applying the COSO framework to Roman Holiday's assertions regarding the reacquired franchise rights requires analyzing various controls. The Roman Holiday auditor must analyze the process used to determine fair value measurements as a control for fraud, also the segregation of duties in Roman Holiday management between those committing the entity to the underlying transactions and those responsible for undertaking the evaluations. The auditor also considers the expertise and experience of those making the fair value measurements, along with the types of accounts or transactions requiring fair value measurements and whether they arise from, as is the case with Roman Holiday, nonroutine or unusual transactions.

The following controls must also be looked at: significant management assumptions used in determining fair value, including failure to apply GAAP and correct accounting standards. The auditor must also analyze documentation supporting management's assumptions, such as the income projections for reacquired franchise rights. Moreover, the integrity of change controls and security procedures for valuation models and relevant information systems, including approval processes and the controls over consistency, timeliness, and reliability of the data used in valuation models all require the auditor's close… [read more]


Accounting Fundamentals for Healthcare Management Term Paper

Term Paper  |  4 pages (1,261 words)
Bibliography Sources: 3

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It is similar to a business accounting entity which captures all reported attributes for the entire business and all its transactions. In the same way, the fund captures all reported attributes of a portion of the governments' activities and resources accounted for in that fund.

The objectives of governmental financial reporting should be the basis for determining the specific accounting principles that are to be used by a governmental entity. The National Council on Governmental Accounting (NGCA) recommends the following types of funds:

Governmental funds

Proprietary funds

Fiduciary funds

Nonfund accounts

The modified accrual or full accrual basis of accounting is used. Governmental funds revenues and expenditures should be recognized on the modified accrual basis. The recognition criteria for revenues include the following:

Revenue is earned during or levied for the period.

Revenue is objectively measurable.

Revenue is collected in the period or soon enough thereafter, usually 60 days, to pay for liabilities incurred for expenditures of the period.

The following are recognition criteria for expenditures:

When operating or capital outlay liabilities are to be paid currently from governmental funds are incurred

When debt service (principal and interest) payments on long-term liabilities are due

The accounting equation of most governmental funds is:

Financial assets -- Related liabilities = Fund balance

In effect, governmental funds are essentially working capital funds, and their operations are measured in terms of sources and uses of working capital.

The accounting equation of proprietary funds is similar to that of a business corporation. It includes accounts for all related assets and liabilities, not just for current assets and current liabilities. Accounting measures net assets, changes in net assets, and cash flows. The accounting equation is:

The sum of Current assets + Capital assets minus the sum of Current + Long-term liabilities = Net assets

Proprietary fund operations are measured in terms of revenues earned, expenses incurred, and net income or loss. Revenue is recognized when it is earned and becomes measurable, while expenses are recognized in the period incurred.

Fiduciary revenues and expenses should be recognized on the accrual basis. Fiduciary funds are accounted for by specific fund type depending upon the nature of the fund. Fiduciary funds include:

Nonexpendable Trust Funds

Expendable Trust Funds

Pension Trust Funds

Agency Funds

Expendable trust funds are accounted for in the same way as governmental funds, while both Nonexpendable Trust Funds and Pension Trust Funds are accounted for in the same way as proprietary funds. Agency Funds are purely custodial (that is, assets equal liabilities); assets and liabilities should be accounted for on the modified accrual basis. Fiduciary fund revenues and expenditures should generally be recognized on the accrual basis.

Nonprofit Organizations

Accounting and reporting standards that are applicable to nonprofit organizations are similar to standards for governmental units, including frequent segregation of activities by fund. Two standards that are specific to nonprofit organizations include FASB 116 and 117. FASB 116 sets standards for accounting for contributions received and made. Under FASB 117, standards are provided to enhance the… [read more]


Financial Standards Reporting Research Paper

Research Paper  |  10 pages (2,690 words)
Bibliography Sources: 7

SAMPLE TEXT:

S. companies, so the preparers have to have some understanding of the U.S. GAAP, and make decisions based on it also. Therefore, German companies try to conform, as best they can, with the large U.S. GAAP as well as their own and the IASB standards. There is no wonder that it seems piecemeal to the rest of the world.

Impact… [read more]


Fraud Continues to Pervade the Accounting Industry Article Review

Article Review  |  2 pages (625 words)
Bibliography Sources: 1

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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

Research Paper  |  4 pages (1,107 words)
Bibliography Sources: 3

SAMPLE TEXT:

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

Essay  |  2 pages (532 words)
Bibliography Sources: 0

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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

Essay  |  2 pages (558 words)
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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)
Bibliography Sources: 1

SAMPLE TEXT:

¶ … 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]


How Repo 105 Accounting Worked for Lehmann Brothers Term Paper

Term Paper  |  2 pages (684 words)
Bibliography Sources: 2

SAMPLE TEXT:

¶ … 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]

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