"Accounting / Auditing" Essays

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Interpersonal Group and Collective Behavior Dynamics Term Paper

Term Paper  |  3 pages (937 words)
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Management - Organizational Behavior

DEPARTMENT of HEALTH and HUMAN SERVICES OFFICE of INSPECTOR GENERAL OFFICE of AUDIT SERVICES

Department of Health and Human Services (HHS) is this country's largest federal agencies with an annual budget that amounts to one quarter that of the entire federal budget and employs more than 60,000 individuals. Within the agency, its varied responsibilities are divided into major operating divisions, such as the Centers for Medicare and Medicaid Services (CMS), which administrates healthcare assistance to millions of beneficiaries; the National Institute of Health (NIH), which oversees medical and health-related research and funding; and the Food and Drug Administration (FDA), which monitors the quality of foods and drugs.

Within HHS, the Office of Inspector General (OIG) monitors all state and local agencies receiving federal funding provided in conjunction with all programs within the authority of HHS. The OIG comprises four separate organizational components: Office of Inspections and Evaluations (OIE); Office of Investigations (OI); Office of Counsel to the Inspector General (OCIG); and Office of Audit Services (OAS).

The HHS-OIG Office of Audit Services is the component organization of the Office of Inspector General responsible for auditing federal expenditures in connection with all federal funds or awards granted to state and local agencies, as well as private medical practitioners and equipment suppliers providing services to beneficiaries of HHS programs. The HHS-OIG-OAS headquarters is located in Washington, DC, and six other regional offices are located around the country. They are individually responsible for conducting audits of entities within their specific regions. Regional Inspector Generals for Audit Services (RIGAS) report to the Deputy Inspector General (DIG) in Washington, who in turn, reports to HHS Inspector General Dan Levinson.

At regional HHS-OIG-OAS offices, federal auditors perform audits of programs and institutions as selected by OAS managers in their annual audit plans in much the same way as Internal Revenue Services auditors conduct taxpayer audits. Within regional OAS offices, managers report to the Inspector General for Audit Services (RIGAS). Each manager maintains a staff of approximately 8 to 12 federal auditors who work in audit teams of 3 to 4 auditors, each. The work of HHS-OIG-OAS audit teams consists of targeting specific issues selected by their managers from the annual HHS-OIG-OAS audit plan, as assigned by each team's manager. Once an audit is planned, the audit team visits the offices of the auditee's facilities and examines all pertinent documentation, such as receipts and patient billing records. After the fieldwork is complete, the individual auditors analyze the data contained in the records and the team reassembles to report its conclusions and issue recommendations on different segments of the audit. Identified audit issues generate lawful instructions issued by the Inspector General requiring auditees to improve compliance where they are deficient and repay federal funds received or expended improperly. Generally, audit issues selected…… [read more]


AICPA American Institute of Certified Public Accountants Term Paper

Term Paper  |  1 pages (387 words)
Bibliography Sources: 1

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Pre-Paid Phones

How could you imagine yourself using the AICPA website as your career develops?

The AICPA (AICPA: American Institute of Certified Public Accountants) website is full of many resources of use to professional accountants, not simply individuals embarking upon their first jobs in the profession. First and foremost perhaps, the website offers helpful articles about recent changes in accounting law. Given the current federal and state regulatory climate after highly publicized recent accounting scandals at respected firms, it is important that members of the profession keep well-abreast of changes in the law. This is not only true of laws specifically pertaining to accounting, but also changes in healthcare policy, for example, which can affect client deductions.

Early on in an accountant's career, it would be helpful to examine the provided links about becoming a CPA, and information about career development and state licensing. For persons who are already working in the profession and who have completed their required education, the website provides links to professional conferences and offers subscriptions to professional journals and online newsletters that can help recent graduates and older accountants learn about new or unexplored opportunities. These real life…… [read more]


Human Resource Management HRM Managing People to Achieve Organizational Effectiveness Term Paper

Term Paper  |  3 pages (723 words)
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Human Resources

Problems Posed by the Behavior of Richard Painter and Why in order to understand the problems posed by Richard Painter in terms of his specific actions, it is first important to understand the system in which he works, how that system relates to him and his personal enrichment, and the conflicts of interest and moral temptations that the system delivers to someone like Richard Painter and can lead them astray quite easily.

First, the dynamic of Richard's role as Chief Audit Executive, or CAE needs to be fully understood. Richard essentially has a dual role in this position due to the desire on the part of the organization to modernize his position; this dual role essentially consists of two main areas- the performance of internal control audits and financial auditing, and within his position, he holds the potential to be able to receive substantial compensation bonuses and increases based upon favorable results presented in the internal control audits. The staff that conducts these audits, thereby basically holding the keys to additional compensation for Richard, are in fact overseen and guided by Richard- herein a conflict of interest definitely lays because of the potential for abuse by him in his supervisory capacity.

Sure enough, Richard soon began to cut the staff of the internal auditing team, thereby reducing its ability to effectively present information that may be damaging to Richard's potential for promotion and compensation, failing to focus on the all important internal auditing functions, and to make no distinction between financial and internal control audits, thereby basically killing all internal auditing functions and giving him free reign to be able to act as he wished, be compensated and rewarded for achievements, while all the time, his real motives and misdeeds were shaded by the lack of oversight by other staff members. Essentially, Richard was able to report huge cost savings, but these cost savings in fact came at the cost of the protections of the firm- from individuals like Richard himself.

Speaking in human resource terms, the HRM functions that the behavior of Richard presents a problem to be those of Manpower Planning and Employee Motivation, both in some…… [read more]


Partnership Agreement Term Paper

Term Paper  |  2 pages (944 words)
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Partnership Agreement

This PARTNERSHIP AGREEMENT is made on July 4, 2007 between John Doe and Sally Mae.

The parties hereby form a partnership under the name of the Partnership to conduct a retail business. The principal office of the business shall be in Brisbane, Australia.

TERM. The partnership shall begin on July 4, 2007, and shall continue until terminated as herein provided.

CAPITAL. The capital of the partnership shall be contributed in cash by the partners as follows: Each partner will contribute and equal one half of the total capital, placed into a separate capital account which shall be maintained for each partner. Neither partner shall withdraw any part of his capital account. Upon the demand of either partner, the capital accounts of the partners shall be maintained at all times in the proportions in which the partners share in the profits and losses of the partnership.

PROFIT and LOSS. The net profits of the partnership shall be divided equally between the partners and the net losses shall be borne equally by them. A separate income account shall be maintained for each partner. Partnership profits and losses shall be charged or credited to the separate income account of each partner. If a partner has no credit balance in his income account, losses shall be charged to his capital account.

5. SALARIES and DRAWINGS. John Doe shall receive a salary for his management services rendered to the partnership. Sally Mae shall not receive a salary for her services rendered to the partnership. Each partner may, from time to time, withdraw the credit balance in his income account.

6. INTEREST. No interest shall be paid on the initial contributions to the capital of the partnership or on any subsequent contributions of capital.

7. Management DUTIES and RESTRICTIONS. John Doe is the manager of the partnership and thus has the right to the management of the partnership business. As manager, John Doe has the right to act without the consent of the other partner in order to borrow or lend money, or make, deliver, or accept any commercial paper, or execute any mortgage, security agreement, bond, or lease, or purchase or contract to purchase, or sell or contract to sell any property for or of the partnership other than the type of property bought and sold in the regular course of its business.

8. BANKING. All funds of the partnership shall be deposited in its name in such checking account or accounts as shall be designated by the partners. All withdrawals are to be made upon checks signed by either partner.

9. BOOKS. The partnership books shall be maintained at the principal office of the partnership, and each partner shall at all times have access thereto. The books shall be kept on a fiscal year basis and shall be closed and balanced at the end…… [read more]


SEC vs. FASB Term Paper

Term Paper  |  1 pages (397 words)
Bibliography Sources: 1+

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SEC FASB

Should the FASB be abolished?

Outlining the major arguments for and against the SEC replacing the FASB

Both the Financial Accounting Standards Board (FASB) and the Securities and Exchange Committee (SEC) play critical roles in establishing the standards of GAAP. Only the SEC has the power and authority of United States law to set and enforce accounting standards. The FASB is a private organization that is supposed to show professional leadership in establishing and improving the accounting methods used to prepare financial statements. It functions much as the National Bar Association or American Medical Association might, in establishing professional guidelines.

The argument for subsuming the SEC into the FABC is that the recent accounting scandals such as Enron, demonstrate that legal 'teeth' are needed to enforce accounting procedures in a uniform fashion. Until now, the FASB has shown little proactive action in addressing ethical issues. For example, the SEC had to ask the FASB to add revenue recognition, concerns about the pooling-of-interests method of accounting, and accounting for financial instruments at fair value, and transparency issues related to derivatives, investments and loans to its agenda for review because the number of SEC enforcement actions related to…… [read more]


Milwaukee Surgical Supplies, Inc Term Paper

Term Paper  |  2 pages (646 words)
Bibliography Sources: 3

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Milwaukee Surgical Supplies

For MSS, the average collection period is a weighted average of the three different collection times. This is as follows: (.3)(10)+(.4)(30)+(.3)(40)

= 27 days.

The firm's current accounts receivable balance will be figured out by calculating the average daily sales and then multiplying this by the average days receivable. The average daily sales is calculated as: $1,200,000 / 360

= $33,333.33.

Thus, the current accounts receivable balance will be $33,333.33 *

= $900,000.

If all non-discount customers paid on the 30th day, the new average collection period would be: (.3)(10) + (.7)(30) = 24 days.

The new receivables balance given this would be $33,333.33 * 24 = $800,000.

The difference between the receivables level before and after is $900,000 - $800,000 = $100,000. Financing this at 8% per year would cost $8,000. ($100,000)(.08). This is the amount that would be saved by tightening the credit policy.

Financial statement analysis is based specifically on financial statements. This type of analysis includes ratio analysis, common size analysis and time series analysis. Financial accounting underlies financial statement analysis, since financial statement analysis is based on the output of financial accounting. As a result of using standardized statements as the basis for analysis, the indicators and ratios that are used will also be standardized, allowing for cross-period and cross-firm comparison.

Operating indicator analysis is typically based on the output of managerial accounting. The measures are typically not based on financial statements but on other measures the firm devises. These measures are not standardized, and therefore vary from firm to firm. They are only useful for comparison over time, internally, because of their proprietary nature. Some operating indicators are common to the industry, however, but the specific definitions and rules for their calculation may not be standardized between firms.

Both types of analysis are useful for health services managers because both provide insight into the firm's performance. The financial statement analysis provides some insight into…… [read more]


Business -- Organizational Development Cases Case Study

Case Study  |  5 pages (1,580 words)
Bibliography Sources: 5

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He explained that from now on all audit reports were to be reviewed by Charles, that the point of report development where that occurred would be jointly determined by Charles and each audit manager; and that all of the changes or corrections suggested by Charles would have to be incorporated or discussed in detail with Charles; and that unless a very specific justification existed to oppose those suggestions, that the audit managers defer to the writer to avoid delays and embarrassment in front of David Long and Joe Vengrin. Immediately thereafter, Richard, Elliot, John, and Jack began to follow the same protocol for editorial review of their teams' audit reports as had been in place between Jim Cox and Charles for months. Within the first report cycle, all five audit managers in federal Region II were producing uniformly improved audit draft reports and headquarters commended Jim Edert for his effective implementation of the new protocols and procedures in his region.

References

Daft, R. (2005) Management. Mason, GA: Thomson South Western.

Edwards, G., Wattenberg, M., and Lineberry, R. (2009). Government in America: People,

Politics, and Policy. New York, NY: Longman.

Nowolinski, G. (2008). A Brief History of the Health and Human Service Office of Inspector General. USGPO: Washington, DC.

Robbins, S.P. And Judge, T.A. (2009). Organizational Behavior. Upper Saddle River,

NJ: Prentice Hall.

USHHSOIG. (2006). Department of Health and Human Services Office of Inspector

General Review of Medicare Prescription Drug, Improvement, and Modernization Act Modifications to Calendar Year 2004 Proposal -- Horizon

Healthcare of New Jersey, Inc. Services. Retrieved June 28, 2011 from:

http://oig.hhs.gov/oas/reports/region2/20501015.pdf

USHHSOIG. (2011). Health and Human Services Inspector General-Office of Audit Services. Retrieved June…… [read more]


Improvement in a Government Agency Essay

Essay  |  7 pages (2,094 words)
Bibliography Sources: 3

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¶ … Improvement in a Government Agency

Introduction to the Organization and the Operation Process

A family member of mine works as an auditor for a U.S. (federal) government agency in the office of the Inspector General for Audit Services. The main function of their office is to conduct financial audits of the various recipients (mostly state and local agencies… [read more]


Organizational Behavior -- Research Paper

Research Paper  |  8 pages (2,386 words)
Bibliography Sources: 8

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Organizational Behavior -- Case Study

Organizational Background

Under the Inspector General Act of 1978, every United States federal agency and federal program is subject to the oversight of an inspector general (IG) with appropriate jurisdiction (CULS, 2011; Edwards, Wattenberg, & Lineberry, 2009). Generally, the office of inspector general (OIG) monitors compliance with applicable federal rules, laws, and regulations, in addition… [read more]


Enron in His Book Book Report

Book Report  |  2 pages (603 words)
Bibliography Sources: 0

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One of the key conclusions that Eichenwald makes is that "it was Enron's tragedy to be filled with people smart enough to know how to maneuver around the rules, but not wise enough to understand why the rules had been written in the first place."

In dissecting the Enron scandal, Eichenwald attempts to tie the issues that Enron had with a blight that affects corporate America and the American economic system in general. He is motivated to do so by the desire to see sufficient systemic reform that such a scandal does not occur again. While it may be a reach to see Enron as a proxy for a broken system -- it was and remains a uniquely large and complex case of fraud -- Eichenwald uses such hyperbole to drive home the lessons he thinks America -- in particular those in the securities and accounting professions -- needs to learn. His book is effective in this respect, but perhaps it can be said that to extrapolate these lessons the Enron situation needs to be put into a better sense of context. Understanding what makes Enron special in the first step, but peeling away the elements of the scandal that were unique to Enron to reveal underlying systemic issues is the most important part of the argument. That part of the argument can be useful in the understanding of corporate and accounting ethics, because such situations can arise in any company. Eichenwald attempts to do this, but is limited by the focus on the scandal of a single company -- the work should be taken with studies of other scandals of the era in order to put Enron's debacle in full perspective.… [read more]


Olla Aljboul Edmonton, Alberta T5x-1g1 Resume

Resume  |  1 pages (369 words)
Bibliography Sources: 2

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Education

Bachelor of Commerce- Accounting

Complete: April 2012

High School Diploma

Queen Elizabeth High school, Edmonton, AB

Complete: June 2007

Relevant Courses

Business Negotiations and Supplier Mgmt., Purchasing, Global Sourcing and Logistics,

Supply Chain Planning Coordination, Management Information and Control Systems,

Strategic Management, Finance, Financial and Managerial Accounting and Cost Accounting.

Qualifications

Progressive continuing educational track as a chartered accountant

Effective team member who works well both individually and in a group

Enthusiastic, intrinsically motivated individual with superior interpersonal, communication, and organizational skills

Employment

CIBC

Aug 2011- Current

Customer Accountant Representative

Edmonton, AB

Building new accounts and maintaining relationships with clients

Dulcee Apparel Nov 2007 - Jan 2011 Edmonton, AB

Manager, Purchaser

Count money to ensure that amounts are correct there is adequate change

Issue receipts, refunds, credits, or change due to customers.

Responsible for ensuring that all employees are doing their jobs correctly, thoroughly

Ensuring objectives and goals are being met or exceeded

Responsible for ordering the inventory as well as managing inventory

Paying company bills by cash, vouchers, or checks.

Ensuring that employees are given regular feedback about their performance,… [read more]


CPA Advice for Homer Simpson Research Paper

Research Paper  |  2 pages (454 words)
Bibliography Sources: 0

SAMPLE TEXT:

Therefore, I would suggest you ignore Moe's comforting statement that it will "literally" meet IRS requirements. As stated above, a taxpayer would have to prove that they are doing the financial transaction for other purposes than to economically benefit from the tax evasion.

The federal government has been tightening the laws about unethical profit for some time now. You may recall Martha Stewart's insider-trading scandal, or the accounting fraud of Enron that resulted in the Sarbanes-Oxley Act of 2002. Though both do not directly relate to your situation, it is clear that one should not attempt to fool the United States government. Once in court, Martha Stewart and the accounting staff of Enron were found guilty. Martha Stewart was convicted of conspiracy and served time in jail, while guilty Enron staff served jail time for fraud.

It is to my recommendation that you receive the advice of your wife as more justified than the advice of Moe. Unethically selling an investment in time for a large reported loss will surely trigger a red flag to the IRS, and your defense will be weak. On top of this, every business venture has some risk, so returns are not even guaranteed, and thus might not end up in your favor anyways.

Please do not hesitate to contact us if you have…… [read more]


Lee College Financial Activities Term Paper

Term Paper  |  5 pages (1,346 words)
Bibliography Sources: 1

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To calculate the loss suffered by the college, the paper deducts Unrestricted Revenues from Total Expenses revealing there is a loss in the total operating income. However, overview of the Lee College financial activities reveals that there are Net Assets Released from Restriction totaled $1,800,000, which comprises of $1,160,000 for the Plant acquisition Restrictions and $640,000 program restrictions. Based on the revenues accrued from net assets released from restrictions, Lee College could boast of the increase in net assets by $980,000. Despite the increase in the Lee Colleges, expense there is an increase in the unrestricted net assets as being revealed in a statement of change in net assets.

A Statement of Change in Net Assets

A statement of change in net assets comprise of the following:

Unrestricted Net Assets

Temporary Restricted

Permanent Restricted

Unrestricted net assets of the Lee College consist of following:

Total Unrestricted Revenues

Net Assets Released From Restrictions

Total Unrestricted Expenses and Losses

Increase in Unrestricted Net Assets

Lee College records $16,230,000 for total unrestricted revenues and $1,800,000 for the net assets released from restrictions and $17,050,000 for total unrestricted expenses. Lee College is able to record $980,000 as an increase in the unrestricted net assets.

From July 1, 2011 to July 30, 2012, there have been an increase in the Net Assets of Lee College totaled $4,920,000. On 1 July 2011, Lee College recorded $3,000,000 in the Net Assets. However, on the 30 July 2012, Lee College records $7,920,000 in Net Assets revealing $4,920,000 increase in Net Assets.

To calculate the increase in net Assets amounted $4,920,00, the paper adds the increase in unrestricted Net Assets totaled $980,000, increase in temporary restricted totaled $650,000 and increase in permanently restricted net assets amounted $3,290,000.

Increase in the Net Assets from 1 January 2011 to 31 December 2012 is $4,920,000 revealing the increase in the 164% in the Net Assets. Lee College has recorded high increase in the Net Assets between 2011 fiscal year and 2012 fiscal year revealing 164% increase. With increase in the organizational Net Assets, Lee College has demonstrated sound financial health despite that the total expenses is higher that the Unrestricted Revenues.

Restatement of the thesis

The paper reviews the financial activities of Lee College in the following format:

A Statement of Unrestricted Revenues

Expenses

Other Changes in Unrestricted Net Assets

A Statement of Changes in Net Assets.

Lee College statement of activities statement reveals that more than 99% of the Lee College revenues are being generated through the combination of tuitions and fees, and sales and services making Lee College to demonstrate sustainable financial activities because largest percentage of college revenues are being generated by operations and sales activities rather than contributions and donations.

To present Lee College financial activities, the paper calculates all the unrestricted revenue of Lee College and all unrestricted expenses. The calculations reveal that Lee College records operating loss for the fiscal year 2012 because the total expenses are greater than total unrestricted revenue. However, from revenues generated… [read more]


Legislative Oversight of Regulatory Term Paper

Term Paper  |  2 pages (570 words)
Bibliography Sources: 2

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The committee is also in contact with all congressmen and may begin investigations after the prompting by a congressmen based on the requests of that congressman's constituents. Informal oversight is conducted at the state and local level by supervisory agents. Informal decisions are considered vital to the overall effectiveness of the agencies in ensuring that local operations run smoothly as opposed to being disconnected through the use of bureaucrats in Washington.

Legislators face many challenges regarding regulatory agencies both from the executive branch and their constituents. While the president has the power to create regulatory agencies, congress has the power to provide the agency's funding and power. This split role often causes tension between the two branches as the executive branch often attempts to enlarge regulatory agencies, alleviating the pressure on the executive branch. However, Congress may find the enlargement unnecessary or detrimental. Additionally, constituents may be opposed to actions taken by a certain agency and are often vocal in expressing this to their Congressmen.

Agency administrators have even greater challenges because they are subject to the oversight of a federal committee that is often disconnected from what the agency actually does. Often Congressmen are unaware of how certain policies and procedures effect the regulatory agencies, making the agencies ineffective and thus starting a downward cycle. Overall, however, an effective regulatory agency administrator will be savvy enough to report the necessary numbers and trends to the Congressional committee to ensure continued funding and support.

Resources

Kaiser, Federick; Oleszek, Walter; Tatelman, Todd. Congressional Oversight Manual, June 10, 2011.

Lipton, Bradley. 2010 Accountability, deference, and the Skidmore doctrine Yale Law Journal (June, 1),http://www.thefreelibrary.com/Accountability, deference, and the Skidmore doctrine.-a0231092161 (accessed February 26, 2012)… [read more]


Enron Debacle Term Paper

Term Paper  |  3 pages (1,072 words)
Bibliography Sources: 1+

SAMPLE TEXT:

Pleading ignorance, however, is not a viable option for the person ultimately responsible for a company's operations. He can still be held corporately responsible for the actions of those working for him.

It is not clear how many others might have been participating in the fraud, or had knowledge of it. According to the "Executive Bios" listed on Enron's Pressroom, two members of the executive board, Jeffrey McMahon, president and chief operating officer, and Richard A. Causey, executive vice president and chief accounting officer of Enron, both began their careers with Arthur Andersen & Co., in Houston. Both individuals, therefore, would have had first hand knowledge of the "unique methodologies to improve financial performance" as taught at Andersen. Watkins, the whistle-blower, was also a former Arthur Andersen accountant.

In a January 17, 2002 Press Release, Kenneth Lay acknowledged that Andersen was reportedly destroying documents after the SEC announced its investigation.

As the focus began its massive spread, the spotlight inevitably fell upon the present Bush administration, primarily because of the Bush team's extensive ties to the energy industries, and personal friendships with some of the key players involved in the scandal. According to a report in U.S. News and World, dated January 21, 2002, coming under particularly heavy fire was Dick Cheney who reportedly formulated a pro-development energy policy during secret meetings with business executives and lobbyists (20). Cheney is now citing "executive privilege" in order to keep from having to reveal what took place during the secret meetings.

The governing instruments that were first set up during the 1930s are still determining the standards for trading in this country. The Generally Accepted Accounting Principles are no longer working. Top elected government figures feel they no longer need to answer for their secret actions that impact the country.

It is clear that a new set of standards is in order, and it should extend not only to private corporations and the very base of the pyramid of economic structure in this country, but should also extend to the top of the pyramid - upon the top elected officials who feel they can invoke "executive privilege" in order to hide the corruption that has left many families devastated in its wake, and has destroyed the trust of a nation and possibly the world.

Works Cited

Andersen. "An 88-Year History of Looking Ahead." 2002. 2/5/02

http://www.andersen.com/website.nsf/content/AboutUsOurStart?OpenDocument

Associated Press. "Former Enron Exec. Found Dead." Hays, Kristen. Jan. 25, 2002.

A.P. story picked up in Washington Post. 2/5/02.

http://www.washingtonpost.com/wp-dyn/articles/A37789?2002Jan25.html

Enron. "Executive Bios." Richard Causey. 2/05/02

http://www.enron.com/corp/pressroom/bios/rickcausey.html

Enron. "Executive Bios." Jeffrey McMahon. 2/05/02

http://www.enron.com/corp/pressroom/bios/jeffmcmahon.html

Guardian Unlimited. "Kenneth Lay: Enron's Embattled Ex-Chairman." January 24, 2002.

2/4/02

http://www.guardian.co.uk/enron/story/0,11337,638645,00.html

U.S. News & World Report. "Business. The Enron Debacle Casts New Light on the Bush Team's Extensive Corporate Ties." Jan 21, 2002. (14-20.)

Washington Post. "Ex-Chairman of Enron Cancels Hill Testamony." Schmidt, Susan. Feb. 4, 2002. Page A01. 2/5/02

http://www.washingtonpost.com/wp-dyn/articles/A18257?2002Feb3.html… [read more]


Transparancy and Public Trust Transparency Essay

Essay  |  2 pages (659 words)
Bibliography Sources: 2

SAMPLE TEXT:

Once the trust has been broken, it is difficult to repair. Even though trust can be rebuilt by apologizing and giving a detailed explanation of what went wrong, organizations must sometimes go to great extents to gain the trust back (Poppo and Schepker, 2010).

Three steps that can be taken to provide transparency and accountability is to first refer back to the mission statement to get a clear sense of what the organization stands for and how it will serve the public. All employees should be reminded of the mission statement on a regular basis. Next, processes and procedures must be clearly written out, understood and agreed upon with each and every employee of the organization. A signed form acknowledging these processes and procedure should be placed in every employee's file. A third and very important step is to have regular checks and balances (audits) to make sure everything is running the way that it should. An organization that is solid with transparency and accountability is an organization that has gained the public's trust.

There were really no insights on what could have been done differently with Maurice's organization. The frequent audits done legally and financially, as well as the every ninety (90) day audits done by The Department of Human Resources is what made his example stand out from the others. Frequent audit is extremely important to transparency and accountability because it serves as a reminder to those involved of what the organization's mission is and how they must serve the public that they have decided to serve. Transparency and accountability is necessary in order for any type of public agency to succeed.

References

Fard, H.D., & Rostamy, A.A. (2007). Promoting public trust in organizations: Explaining the role of public accountability . Public Organization Review, 7(4), 331-344.

Poppo, L., & Schepker, D.J. (2010). Repairing public trust…… [read more]


Dead Organizations Essay

Essay  |  2 pages (622 words)
Bibliography Sources: 1+

SAMPLE TEXT:

Dead Organizations

The Value of Autopsies That Analyze Dead Organizations

The rapid demise of enterprises that reached such great heights of success very quickly in their lifecycles only to come plummeting to the ground provide fertile examples of how not to run a business. These cautionary tales can form a framework for evaluating how a given business is defined, managed and invested in for growth or not. In Arthur Anderson, Enron, Tyco, MCI and many others, there is a fundamental foundation of business ethics that needs to be evaluated in the context of how these enterprises were run. It is the intent of this analysis to argue for more rigorous post-mortems to be done, autopsies at the process and systemic level, audits not just of operational issues but the ethical factors as well.

Postmortems on the Fallen: Why Corporations Die

It is invaluable to understand and appreciate why one business started within a year can have specular success while another dies quickly and with great public disgrace. it's invaluable to see at the most structural levels and at the core of assumptions, why a given business fails and other succeeds. The more one studies Arthur Anderson, Enron, Tyco and others, the most fundamental truth emerges. Corporations who fail are built on a foundation of ethical assumptions and hypotheses that by their very nature invite destruction. In analyzing these firms which have failed so quickly, it is apparent that the assumptions that anchored their business models were ethically challenged. Enron selling futures contracts not only on energy but on the price of energy, from electricity and natural gas to oil, all wrapped up in a highly secretive private trading exchange that sought to optimize price per option and projected futures demand level set a precedent of a lack of accountability and transparency with investors that was easily defensible over time (Sherman, Chambers,…… [read more]


Financial Statements in This Text Essay

Essay  |  2 pages (613 words)
Bibliography Sources: 1+

SAMPLE TEXT:

¶ … Financial Statements

In this text, I discuss the order followed in the preparation of financial statements. In addition to identifying the order of preparation, I also comment on the logic behind the same. In so doing, I will concern myself with four financial statements. These are the Income Statement, Statement of Owner's Equity, the Balance Sheet and finally, the Cash Flow Statement.

The relevance of financial statements cannot be overstated when it comes to the communication of information regarding a given entity's performance as well as financial health. Thus businesses typically prepare financial statements so as to facilitate the communication of vital financial information to the intended users of such information. Users in this case include but they are not limited to shareholders, the government, creditors etc. On preparation of the adjusted trial balance, businesses undertake to prepare the other main financial statements while adhering to the logical order highlighted below.

1. Income Statement

The income statement according to Porter and Norton (2010) "summarizes revenues and expenses." Typically, this statement is prepared first based on the impact it has on the other financial statements. For instance, this statement facilitates the computation of the net income or loss figure which is utilized in the preparation of the statement of owner's equity.

2. The Statement of Owner's Equity

In the opinion of Cunningham et al. (2011), "the statement of changes in owner's equity summarizes the transactions that affected owner's equity during the accounting period." Information contained in this statement is utilized in the preparation of some sections of the balance sheet i.e. The stockholder's equity section.

3. The Balance Sheet

The balance sheet can in basic terms be described as a "financial statement that summarizes the assets, liabilities, and owner's equity of a company" (Porter and Norton, 2010). The balance sheet is regarded a rather important…… [read more]


Guidance for Revenue and Expense Recognition Methods Term Paper

Term Paper  |  4 pages (1,072 words)
Bibliography Sources: 1+

SAMPLE TEXT:

¶ … guidance for revenue and expense recognition methods, both standard and percentage of completion criteria. It also discusses the pros and cons of expensing stock options.

It concludes with recommendations for a manufacturing company to carry out given this information.

Revenue and Expense Recognition Methods

SEC Staff Accounting Bulletin No. 101 (SAB 101) - Revenue Recognition in Financial Statements summarizes views in applying generally accepted accounting principles (GAAP) to revenue recognition in financial statements (Turner, 2001). SAB 101 is based on four principles established in GAAP. Those principles state that revenue generally is realized or realizable and earned when all of the following criteria are met:

Persuasive evidence of an arrangement exists, 2. Delivery has occurred or services have been rendered, 3. The seller's price to the buyer is fixed or determinable, and, 4. Collectibility is reasonably assured.

These conditions reflect the simple idea that revenue on a sale should not be recognized until the seller has fulfilled its obligations to the buyer under the sale arrangement. Expenses are recognized in the same period in which the benefits derived from those costs are recognized; this is referred to as the matching principle (Adjusting the accounts). Thus, recognition of expenses is dictated by revenue recognition, so associations between revenues and costs must be established.

The revenue recognition and matching principles mentioned above are used under the accrual basis of accounting (Adjusting the accounts). Under cash-basis accounting, revenue is recorded only when cash is received, and expenses are recorded only when paid. However, GAAP requires accrual basis accounting because the cash basis often causes misleading financial statements. With accrual basis, revenue must be recognized in the accounting period in which it is earned, not just when money is exchanged. In a service business, revenue is earned at the time the service is performed as discussed below.

Revenue from the rendering of services can be recognized by reference to the stage of completion of the transaction when the following conditions are met (Service and construction contract revenue, 2002):

1. The amount of revenue can be measured reliably

2. The flow of economic benefits to the entity is probable

3. The stage of completion at the period end can be measured reliably

4. The costs incurred to date and the costs to completion can be measured reliably

Management should delay the recognition of revenue until the above criteria are met. Revenue might therefore be recognized in certain instances after all conditions of the service or construction contract have been fulfilled, even when the contract spans more than one accounting period.

A straight line basis of revenue recognition should only be used for service revenues when the service is provided by an indeterminate number of acts over a specified time period and when there is no other method available that provides a better measure of the stage of completion (Service and construction contract revenue, 2002). Instead, revenue should be recognized according to the stage, or percentage of completion of the contract. There are different… [read more]


Watts's and Zimmerman's Research Term Paper

Term Paper  |  5 pages (1,518 words)
Bibliography Sources: 1+

SAMPLE TEXT:

Volume 7 Number 3 Fall 1994. Page 3. On the Internet at http://www.studyfinance.com/jfsd/pdffiles/v7n3/rezaee.pdf

4. Watts. R.L. & Zimmerman. J.L., (1978), "Towards a Positive Theory of the Determination of Accounting Standards," The Accounting Review, Vol. 53, No 1, pp. 112-134.

5. Sidhu, K; Whittred, Greg. The Role of Political Costs in the Deferred Tax Policy Choice. Australian Journal of Management. June 2003.

6. Nujaki, Merridee. A citation trail review of the uses of firm size in accounting research. Journal of Accounting Literature. 1997

1978. Page 113. From Milne, Markus J. Positive Accounting Theory, Political Costs and Social Disclosure Analyses: A Critical Look. University of Otago. Page 4. On the Internet at http://www.commerce.otago.ac.nz/acty/research/pdf/postive_accounting_theory.pdf

Ibid.

Rezaee, Zabihollah. AN INVESTIGATION OF THE RELATIONSHIP BETWEEN MULTINATIONAL COMPANIES ATTRIBUTES AND THE MARKET EFFECTS OF SFAS NO. 52. Journal Of Financial And Strategic Decisions. Volume 7 Number 3 Fall 1994. Page 3. On the Internet at http://www.studyfinance.com/jfsd/pdffiles/v7n3/rezaee.pdf

Watts and Zimmerman. Page 115.

Milne, Markus J. Positive Accounting Theory, Political Costs and Social Disclosure Analyses: A Critical Look. University of Otago. Page 4. On the Internet at http://www.commerce.otago.ac.nz/acty/research/pdf/postive_accounting_theory.pdf

Martien Jan Peter Lubberink. Financial statement information: the impact of investors and managers. Groningen: SOM, 2000… [read more]


SEC That Is Responsible Term Paper

Term Paper  |  4 pages (1,120 words)
Bibliography Sources: 1+

SAMPLE TEXT:

The plane was estimated to have a fair market value of $950,000 at the end of 2002. How much depreciation expense should Red Airways record in 2002 on this plane on December 31, 2002?

a. $30,000

16. On October 1, 2002, the Golden Triangle Gazette received $1,400 for newspaper subscriptions spanning October 1, 2002 through April 30, 2003. Throughout 2002 and 2003, the Gazette delivered daily newspapers to individual subscribers. How much revenue should the Gazette recognize in 2002 relative to these subscriptions?

a. 600

17. Joyner Distributing is estimating its allowance for uncollectible accounts at January 31, 2002, based on the following information:

Accounts Receivable, January 1

$1,375,000

Total Accounts Receivable write-offs during January

$200,000

Allowance for Uncollectible Accounts, January 1

$175,000

Total sales for January

$10,000,000

Sixty percent Joyner's total sales for January 2002 are credit sales. Based on past experience, Joyner estimates that 5% of its credit sales will be uncollectible. What is uncollectible accounts expense for January 2002?

a. $300,000

18. On July 10, 2002, Fins and Feathers Pet Shop purchased 100 bags of Koi Chow at $10 each from Far East Distributing Company. On July 11, Fins and Feathers sold 60 sacks bags at $15 each. Fins and Feathers uses a perpetual inventory system. Related to the sale of the 60 bags, the company should recognize, respectively, increases of ____ in sales revenue and in ____ cost of goods sold.

a. $900 and $600

19. When FIFO and LILO are compared,

a. LIFO yields a higher net income during inflationary times than FIFO.

20. The principal reason for reconciling the cash balance per books with the balance shown on the bank statement is to:

a. Determine the amount of cash in the account actually available to the entity.

21. Which one of the following statements about inventory errors is true?

a. Ending inventory and cost of goods sold have an inverse relationship; that is, if the value of cost of goods sold is too low, the value of ending inventory is too high.

On January 1, 2002, Run N' Go Pizza purchased a delivery truck for $50,000. The truck has a $5,000 salvage value and a four-year useful life or 56,250 miles.

22. If Run N' Go uses the straight line method, how much depreciation expense should Run N' Go recognize in 2002?

a. $11,250

23. If Run N' Go uses the double-declining balance method, how much depreciation expense should Run N' Go recognize in 2002?

a. $25,000

24. If Run N' Go uses the units-of-production method and puts 18,500 miles on the truck in 2002, how much depreciation expense should Run N' Go recognize in 2002?

a. $14,800

25. On January 1, 2002, Green Pharmaceuticals purchased a patent for a new arthritis medication from Winwood Research Labs for $1,000,000. The patent has a remaining legal life of 10 years and an estimated useful life of 5 years. What adjusting journal entry should Green prepare on December 31, 2002, relative to this patent?

a. Amortization… [read more]


Depreciation Is a Very Important Concept Essay

Essay  |  2 pages (580 words)
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Depreciation is a very important concept in regards to identifying asset values in a particular firm. Stakeholders, particular investors, use depreciation to better determine hidden or overstated value of assets. Depreciation also provides a means for those who study financial statements to better ascertain the book value of a company. Simply stated, depreciation is the process by which costs are allocated to plant assets over its remaining life. Depreciation however, does exclude some items such as land or real estate. Depreciation is very important in financial reporting as it helps to properly identify asset values of plant and equipment. The purpose of depreciation is to closely match the costs of plant and equipment, with a useful life of more than a year, to that of the revenues earned on the asset. This process is difficult as it is hard to find a direct correlation between exact revenues and the cost incurred. As such, it is commonplace for the costs to be spread throughout the useful life of the asset through depreciation. Depreciation is used under various names depending on the asset. For example, if the asset is intangible, such as a brand, symbol or intellectual property, the process of allocating costs over time would be referred to as amortization. In regards to natural resources such as oil, natural gas, minerals, etc. The process would then be termed, depletion. Depreciation irrespective of the working, in many respects, does not indicate the fair value of an asset. In fact, the market value of the assets can increase while the stated book value due to depreciation will decrease (Elliot, 2004).

There are various methods of depreciation that are used depending on the underlying operations of a firm. These methods provide ample flexibility on…… [read more]


Financial Statements Attn: Aunt Cookie Term Paper

Term Paper  |  2 pages (436 words)
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As such, the interest for the note is listed, whether paid or not, during the period in which

it was incurred -- in this case, December of this year. It is listed as a liability and not an expense, since it is a debt note for future payment and not immediately due, the way an expense (for example, employee wages) would be.

C) The advance received from a club which is organizing its annual fundraiser is not revenue; it is actually a liability until delivery of the complete order is made. This is because "unearned revenue" is a sort of loan from the client based on the expectation that services will be provided because of the advance. This means that the cash advance will be classified as a liability until actual delivery of the cookies to the club is made, at which point it will become income along with the rest of the payment for the order.

The interest mentioned in paragraph B. above is the only one of these transactions that directly effects owner equity. It does this because the adjusted interest expense for the month is subtracted directly from expenses, making a direct change to how much equity the owner has…… [read more]


Apple Analysis of Nominal Research Paper

Research Paper  |  3 pages (933 words)
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Liability and equity line items have seen the some linear growth pattern as revenues over the past three years.

The common size statements reinforce the conclusions of the nominal analysis. The common size statements start with a baseline -- revenue for the income statement and total assets on the balance sheet (NetMBA, 2010). Much of the discussion with respect to the last three years at Apple is that the company's revenues have grown significantly, with most line items experiencing broadly the same trend. Cost of goods sold has grown at a very stable rate relative to the growth in revenue -- between 59.5% and 60.6% of revenue. This means that Apple has good pricing control in the marketplace, and good cost control over its inputs. Selling, general and administrative expense has been shrinking relative to revenue, as has R&D expense. This means that Apple is containing its internal growth, despite having incredible amounts of cash at its disposal. This reflects fiscal discipline, but also that the company has found few genuinely good opportunities for its capital. The result of its costs growing more slowly than its revenues is that Apple's net margin has continued to increase over the past three years, from 19.19% in 2009 to 23.95% in 2011. This is a positive development for the company.

The common size balance sheet measures the growth or lack thereof of key line items. The cash and short-term investments represented 49.4% of the total assets in 2009, and this declined to 22.3% by 2011 as the cash was held at a stable level and the assets increased. The long-term investments increased from 22.16% to 47.79%. Perhaps the more important figure is combined cash and long-term investments. This was 71.56% of assets in 2009 and 70.09% in 2011, only a minor decrease. The note above about inventory is made clear here -- inventory in 2010 was significantly higher as a percentage of assets than in either 2009 or 2011. Thus, the 2010 figure was viewed by the company as a deficiency and corrective action taken to adjust it downwards again. This also occurred with receivables in 2010.

The company's capital structure has remained largely unchanged, with total liabilities accounting for 33%, 36% and 34% of its wealth in the three years. Within this figure, current liabilities were higher in 2010 at 27.56%, before the corrective action in 2011. This indicates that management pays close attention to these figures and responds to them, a sign of strong management practices.

Within the equity side, the value of common stock relative to the value of the company has steadily declined, even though billions more has been issued. This has allowed the company to experience an increase in the…… [read more]


Working With Financial Statements Term Paper

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On the financial report the accountant creates an entry known as the prepaid expenses and then moves the cash from the expense column to prepaid expense column. The second entry is the unearned revenues in which the company receives cash for a service that is to be offered later. An example is a situation where the client pays the company a deposit for goods to be delivered in the next two to three months. The accountant is therefore expected to prepare an unearned revenue entry by moving the cash from unearned revenue account to the revenue account (Davoren, n.d.).

Another adjusting journal entry is the accrued expense entry, which are the expenses incurred by a company before giving out the payments. For instance, if a company has taken a loan from the bank, the bank has to give the company an amount that it should submit on a monthly basis and a period by which the loan should be cleared. The amount that the bank gives is always inclusive of a certain percent of interest, which is referred to as the accrued expense. In such a case, the accountant indicates this cash on the relevant expense column before making payments but after payments are made, the cash is moved to the expense owed column.

Accrued revenue in a financial report of a company mostly shows the services delivered but payment has been done. A good example for this is when a company delivers receipt books but the client has not made any payments, the accountant prepares an accrued revenue entry. This entry has got two columns i.e. The receivable account and the returns account. Before these payments are made, the accountant will indicate this cash on the returns column and once the payments are done he/she transfers the cash column to the receivable account.

References:

Davoren, J. (n.d.). Four Types of Adjusting Journal Entries. Retrieved October 21, 2012, from http://www.ehow.com/info_8210116_four-types-adjusting-journal-entries.html

"Expenses Recognition -- The Matching Principle." (2008, July). Accounting Financial & Tax.

Retrieved October 21, 2012, from http://accounting-financial-tax.com/2008/07/expense-recognition-the-matching-principle/

"Revenue Recognition." (n.d.). Tenrox. Retrieved October 21, 2012, from http://glossary.tenrox.com/Revenue-Recognition.htm… [read more]


Convergence of International Financial Reporting Standards IFRS Essay

Essay  |  2 pages (456 words)
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Convergence of IFRS

Briginshaw, J. (2008). What will the international financial reporting standards (IFRS) mean to businesses and investors? Graziadio Business Review, Vol. 11, Issue 4. Pepperdine University. Retrieved January 14, 2013 from http://gbr.pepperdine.edu/2010/08/what-will-the-international-financial-reporting-standards-ifrs-mean-to-businesses-and-investors/

This article describes the IFRS standards and how they were developed by the IASC and its successor organization, the IASB. The author notes that the SCE has been fairly aggressive in pursuing a convergence agenda. IFRS will require investors to adjust interpretation of earnings numbers. IFRS is characterized as more "principles based" than U.S. GAAP, which is seen as largely "rule based." One major distinction between IFRS and GAAP is under IFRS, LIFO is not allowed and U.S. companies will be forced to discontinue LIFO. While the result will be increased net income, it will ultimately be a disadvantage to stockholders because companies will be charged more corporate taxes. This tax penalty could be in the hundreds of millions of dollars for some large industrial firms. IFRS gives management more discretion in the area of asset valuation as a whole discretion that is also likely to increase company income. In the area of research and development costs and the related area of homegrown intangible assets valuation, IFRS is more generous than GAAP. IFRS is less conservative and allows an increase in the risk of overstating income in a company's financial statements. IFRS also allows…… [read more]


Financial Management: Weaknesses of Ratio Analysis Essay

Essay  |  2 pages (676 words)
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Financial Management: Weaknesses of Ratio Analysis

In basic terms, financial ratios are used by a wide range of stakeholders for various purposes. For instance, while creditors can use liquidity ratios to determine an entity's ability to settle its obligations in the short-run, investors could utilize profitability ratios in an attempt to measure how successful an entity is especially in regard to profit generation. It is however important to note that regardless of the usefulness of financial ratios, they also have a number of key weaknesses.

Financial Ratios: A Concise Definition

Financial ratios are the key tools of financial statement analysis. Depending on what they measure (or what they purport to measure), financial ratios can be grouped into various categories, i.e. profitability ratios, liquidity ratios, etc.

Weaknesses and Limitations of Financial Ratios

As I have already pointed out, regardless of their relevance when it comes to financial statement analysis, financial ratios have a number of limitations or weaknesses. To begin with, Siegel and Shim (2006) point out that diversity in the application of GAAP could effectively lead to a distortion of the ratios computed. In this case, the authors give an example of a firm using FIFO while another deems it fit to utilize LIFO in inventory valuation. In such a case, the conclusions drawn from the ratios computed would most likely be erroneous. Closely related to this, it should also be noted that as Siegel and Shim (2006) point out, the actual components of the said ratios are not usually revealed. For instance, in the words of the authors, "the current ratio may be high but inventory may be composed of obsolete merchandise and receivables may include accounts owed from a politically unstable foreign country" (Siegel and Shim, 2006). In such a case, the said ratio cannot be expected to show a true picture of the company's ability to settle its obligations in the short-term. In that regard, the information supplied by ratios could in some instances be faulty.

Secondly, it is also important to note that ratios…… [read more]


Department Defense Inspector General Office Essay

Essay  |  5 pages (1,438 words)
Bibliography Sources: 4

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The inspector general conducts all criminal, administrative and civic investigations in relation to the violation of the federal rules and laws. The agency audits the contractors and guarantors for the allegations of misconduct on their part.

Productivity and Performance Evaluation

The responsibility of the office of inspector general is to carry out the audits, detect and prevent abuse and fraud,… [read more]


Costing System for Use Assessment

Assessment  |  1 pages (403 words)
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It is important to note that a costing system is not intended to replace an accounting system. Instead, the systems actually work within the broad framework of general accounting to extract specific data for quick and easy analysis. By making use of a costing system, it is possible to quickly identify expenditures that were intended to benefit the company, but are failing to do so in a significant way. This makes it possible for managers to make the necessary adjustments to the company's strategy and thus exercise a more responsible use of resources. Furthermore, the information on the cost of a product or service can be used by managers to set the prices of the product, control operations and develop financial statements. From this perspective, it can be said that regular use of a costing system can help to minimize waste and also make it possible to direct available resources in more productive directions rather than continuing to spend money on items that are accomplishing little for the company.

Sources Used: Orloff, A. & Mullis, D. 1998, The Accounting Game: Basic Accounting Fresh from the Lemonade Stand, Sourcebooks, Inc.,…… [read more]


Life in a Bag Essay

Essay  |  2 pages (765 words)
Bibliography Sources: 1

SAMPLE TEXT:

INTRODUCTION

A. Attention Getter: Google, Apple, Microsoft, GAP and Banana Republic among other companies all have at least one thing in common- they have an accounting department. Accounting is one of the most important parts of how a company's work.

B. Relevance to Audience: Accounting is a highly relevant and important part of a lot of companies and firms, and the skills that are also used in accounting is something that is highly applicable in day-to-day finances.

C. Credibility Statement: As a student of accounting classes, I have realizes the importance of how accounting fits into the bigger picture of companies and firms, as well as find the skills that I have acquired in class in the real world when I am shopping or paying bills. Further to my classroom education and experiences surrounding it, I have also done additional research to further reinforce my understanding of how accounting fits into the world.

D. Thesis Statement: There are necessary steps that one needs to take to be an accountant and understand what an accountants functions are before one can evaluate the impact that it has on a company.

II. BODY

A. To become an accountant, it necessary to take the coursework necessary in the field of accounting and ultimately, to become certified as an accountant, one must pass the "Certified Public Accounting" or CPA exam.

1. A Bachelors Degree is the minimum required degree to be an accountant at a firm.

a. Many aspiring accountants will need to further supplement their education with a CPA certification in order to attain the national standard of education that is required and looked favorably upon by employers.

b. The exam has been developed in order to "protect the public interest by helping only qualified individuals become licensed as U.S. Certified Public Accountants (CPAs)" (American Institute of CPAs).

2. The Certified Public Accounting exam is administered, similar to other standardized tests and is required to practice accounting for a company.

REFERENCES

American Institute of CPAs, . "The Uniform CPA Examination." American Instiute of CPAs, 2011. Web. 25 Oct 2011. read more-->[read more]


Balance Sheet Financing the SEC Thesis

Thesis  |  3 pages (870 words)
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Lehman regularly increased its use of Repo 105 transactions in the days prior to reporting periods to reduce its publicly reported net leverage and balance sheet. Lehman used the cash from Repo 105 transactions to pay down other liabilities, thereby reducing both the total liabilities and the total assets reported on its balance sheet and lowering its leverage ratios. A few days after the new quarter began, Lehman would borrow the necessary funds to repay the cash borrowing plus interest, repurchase the securities, and restore the assets to its balance sheet. Lehman never publicly disclosed its use of Repo 105 transactions, its accounting treatment for these transactions, the considerable escalation of its total Repo 105 usage in late 2007 and into 2008, or the material impact these transactions had on the firm's publicly reported net leverage ratio.[footnoteRef:2] [2: http://www.zerohedge.com/article/repo-105-scam-how-lehman-fooled-everyone-including-allegedly-dick-fuld-and-how-other-banks-a]

PRINCIPLES of OFF BALANCE SHEET FINANCING

A separate legal entity such as a special purpose vehicle (SPV) may be established as either a spin off or partnership for a particular purpose. All associated assets and liabilities are removed from the parent company's balance sheet and transferred to the SPV's balance sheet. Companies use this to get around debt covenants and increase earnings and quality of earnings by setting up the SPV to take on extra debt. Banks may create SPV's to purchase credit card receivables with proceeds from a bond offerings backed by the receivables themselves, the proceeds from the cardholders being used to pay the bond investors. Thus much of the credit risk is removed as with the removal of the asset, associated liabilities are also derecognized. The SPV holds assets and pays the pass-through's security's investors the net cash flows those assets generate. In this way, the SPV's assets and liabilities are automatically cash matched, so there is no asset-liability risk.

Another approach to off balance sheet financing is by using the difference in accounting treatment for capital and operational leases. Capital leases are treated as purchases with the related asset and lease obligations (liabilities) appearing on the lessee's balance sheet. However in operational leases, the leasing company retains ownership with the lessee payments appearing as operational expenses. Operating leases have to be disclosed in footnotes to the financial statements. As operating leases keep substantial liabilities away, this may have the effect of distorting performance measures such as return on assets and debt to capital ratios. Synthetic leases may also be used to… [read more]


Corporate Misconduct Term Paper

Term Paper  |  2 pages (671 words)
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Watkins discovered the accounting problems while working for Fastow, who was indicted last month on 78 counts charging him with masterminding complex financial schemes that enriched him and helped doom the company. The element of personal greed and the need for power also likely caused Enron's corporate insiders as well as Arthur Andersen LLP to overlook the fact that Enron was not as profitable as the company alleged.

III. CONCLUSION

Corporations provide numerous invaluable functions, both on an individual and societal level. First, corporations offer individuals a source of income in the form of employment, stimulating economic growth both on a macro and micro level. Next, corporations offer individuals the chance to enhance their income by owning a portion of the corporation in the form of stock. Third, corporations develop products and services that are innovative, either because they improve on past products and services or because they invent a totally new product or service. Assuming everything is on the up and up, nearly everyone may reap the profits of a corporation.

In recent years, there have been numerous high-profile corporate scandals involving companies that were once well-respected. Generally, these corporate scandals related to corporate loans to insiders as well as to insider trading and accounting scandals (i.e., over-inflating income in order to please Wall Street analysts and shareholders). Examples of companies involved in such scandals include Arthur Andersen LLP, Enron, Global Crossing, and WorldCom. Not only do these corporate scandals hurt a company's profitability and reputation, but such scandals also de-moralize society and result in financial difficulties for employees who are laid off. In order to eliminate or minimize corporate scandals, there need to be refinements to existing laws (such as the July, 2002 refinement banning corporate loans to insiders) as well as greater oversight by neutral entities and individuals…… [read more]


Cash Basis vs. Accrual Term Paper

Term Paper  |  3 pages (871 words)
Bibliography Sources: 1+

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The differences between the two systems can be shown in the following example.

AXY FARMS (Cash)

Year ending December 31

RECEIPTS

Cash grain sales

Government program payments

TOTAL CASH RECEIPTS

EXPENSES

Cash operating expenses

Interest paid

TOTAL CASH EXPENSES

Depreciation*

TOTAL EXPENSES

Net farm income from operations (cash basis)

Gain/loss on sale of farm capital assets

Net farm income, before tax (cash basis)

Income taxes & S.S. taxes paid

NET FARM INCOME, AFTER TAX cash basis)

AXY FARMS (Accrual)

Year ending December 31

REVENUES

Cash receipts from grain sales

Change in grain inventory

Government program payments

Change in accounts receivable

GROSS REVENUES

EXPENSES

Cash disbursements for operating expenses

Change in accounts payable

Change in prepaid expenses

Change in unused supplies

Change in investments in growing crops

Depreciation

TOTAL OPERATING EXPENSES

Interest paid

Change in accrued interest

Accrual interest expense

TOTAL EXPENSES

Net farm income from operations

Gain/loss on sale of farm capital assets

Net farm income

Income taxes & S.S. taxes paid

Change in income taxes & S.S. taxes payable

Changes in current portion of deferred taxes

Accrual income taxes & S.S. taxes

NET FRAM INCOME AFTER TAX accrual basis)

AXY Farms appears to be moderately profitable on a cash basis. However, after adjusting the cash basis income statement to approximate an accrual basis income statement for the same period, net income after tax increased from $18,000 to $46,000. Because of the accrual adjustments, gross revenues were greater by $25,000 (from $175,000 to $200,000) while total expenses were less by $19,000 (from $149,000 to $130,000). However, because of the accrued and deferred income taxes, the expense for income taxes is increased by $16,000 (from $8,000 to $24,000). After making the accrual adjustments to the income statement, AXY was shown to be more profitable than had been portrayed by the cash basis method of accounting. The more critical situation would occur if the accrual-adjusted net income showed the business to be less profitable than the producer may have been led to believe by relying solely on cash basis income statements. As this illustration shows, computing income on a cash basis can misrepresent true profitability for an accounting period when there is a time lag between the exchange of goods and services and the related cash receipt or cash disbursement. Such distortion can be substantially reduced by also considering the net changes in certain balance sheet accounts.

Bibliography

David Minars, Davis A. Minars Accounting: Themes, Keys, Formulas, Glossary of Accounting Terms for Your Introductory College Course Barrons Educational Series; February 1992.…… [read more]


Fraud Awareness Scholarship Request Term Paper

Term Paper  |  1 pages (308 words)
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My general degree in accounting helps me to understand that not only publicly traded companies have problems with fraudulent activities. My well-rounded accounting base will make me desirable for hire in both the public and private sector.

Lastly, I think that I can be of use working against fraud. I understand that fraud is not a victimless crime - that investors and creditors are the real victims. It is my hope to continue my studies and to work in fraud awareness in order to protect victims who may have little to no understanding of the crimes committed against them. Please consider me favorably for this scholarship, as I feel I can bring my knowledge, enthusiasm and perseverance to this field of accounting.… [read more]


Communication Book in Business Writing Book Review

Book Review  |  2 pages (651 words)
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¶ … Communication Book

In business writing, organization is vital to ensure that key ideas are apparent. In this context, organization is central in coherent writing, whereby, information provided has a logical organization for ease of following. Therefore, coherence is an important tip for effective business writing, because coherent writing has organization as its primary aspect to provide for business readers to grasp key ideas. Most importantly, there are several methods in place for business writers to make their writing coherent. Some of the techniques include evaluating the purpose and the reader has needs, then outlining the findings prior to writing. Moreover, writing with unity, using summary sentences and transitions, and structuring effective paragraphs and essays are other ways of making business writing coherent (Claire and Gordon, 2012).

Business writing requires every sentence to show a correlation to the main idea, which appears differently in various writings. Although a memo, and a report differ in length they both have something in common; that is, they have a central idea, or purpose. Therefore, main idea is core to the entire document, and this brings unification, which in turn makes writing coherent. In addition, summarizing the main idea is crucial in coherent writing. Summary sentences have the capacity to capture the attention of the reader because they contain or address the needs of the reader. Writers can use summary sentences at the beginning or in the conclusion of a piece of writing. On the other hand, transitions are essential elements of coherent writing because they link ideas (Claire and Gordon, 2012).

Notably, transitions can appear in any part of the piece of writing because their function is to link ideas. Therefore, they can link sentences, paragraphs, or any other major divisions of the document. In addition, transitions makes apparent the relationship amid two ideas, either their difference, or how the two are related to the main idea. Some transitional words include moreover, however, for example, and several…… [read more]


IFRS in Canada Research Paper

Research Paper  |  3 pages (951 words)
Bibliography Sources: 6

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It opens up easier access to new, emerging markets like India, which also adopted the IFRS standards recently. This greatly increases the ability for Canada to trade easier with international markets. Moreover, it helps facilitate foreign investing in Canada because of more unified international standards now as well. Here, "the goal of IFRS is to improve financial reporting internationally by establishing a single set of high quality, consistent, and comparable reporting standards" (Canadian Institute of Chartered Accountants, 2011). These can be taken advantage of in a growing international context, where the opportunities for global business are greater than what NAFTA had to offer years ago.

Clearly, the United States needs to rethink its isolationist stance on financial recording methods. True, the U.S. GAAP will still hold influence in many of the countries that are thinking of switching to the IFRS, like seen in Canada today with certain exemptions for U.S. listed organizations. However, it is just bad business to keep working on a dying, outdated system, as the world's biggest economic players start to adapt a new system. This does not necessarily mean a full integration of the IFRS standards without regard to potential adjustments in order to flow better with accounting practices here in the United States (IFRS, 2013). The best method for the United States would be to make an integrated approach, where GAAP principles are aligned with IFRS in a way that makes it easy to adjust over a longer period of time, with special allowances based on the unique needs of the United States.

In fact, this is already in the works. One report suggests that "the U.S. standard setter, Financial Accounting Standards Board (FASB), is now working with the International Accounting Standards Board (IASB) to develop converged standards" (Canadian Institute of Chartered Accountants, 2011). Clearly, the adoption process is already in the making. The U.S. SEC should just take precautionary measures, like Canada and other countries to adjust the principles so that they will be most successful in the unique environment of the United States. Still, the United States would just get left out in the cold if it were to ignore the IFRS standards completely, thus loosing opportunity for international business and economic opportunities.

References

Canadian Institute of Chartered Accountants. (2011). The CICA's Guide to IFRS in Canada. Web. http://ocaq.qc.ca/pdf/ang/6_presse/infoca/2007/InfoCA1185_Guide_EN.pdf

Canadian Institute of Chartered Accountants. (2012). IFRS Adoption in Canada: An Empirical Analysis of the Impact on Financial Statements. Web. http://www.cga-canada.org/en-ca/ResearchReports/ca_rep_2013-10-03_IRFS.pdf

IFRS. (2013). Canada. IFRS Application Around the World. Web. http://www.ifrs.org/Use-around-the-world/Documents/Jurisdiction-profiles/Canada-IFRS-Profile.pdf

PWC. (2013). IFRS Adoption by Country. Web. http://www.pwc.com/en_US/us/issues/ifrs-reporting/publications/assets/pwc-ifrs-by-country-apr-2013.pdf

PWC. (2014). Canadian GAAP to IFRS. IFRS Tools. Web. http://www.pwc.com/ca/en/ifrs/canadian-gaap-conversion-ifrs.jhtml… [read more]


Convergence IFRS Research Paper

Research Paper  |  3 pages (1,031 words)
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IFRS

International Financial Reporting Standards (IFRS) are becoming the global standard for financial accounting. To accomplish making them the standard, there needs to be convergence between IFRS and other accounting standards. Many nations have their own generally accepted accounted principles (GAAP). It is understood, however, that when the U.S. GAAP and IFRS achieve convergence, the rest of the world will need to follow, Australia included. Thus, the U.S. GAAP/IFRS convergence process is of considerable interest to Australians as well. For companies operating internationally, the convergence process is relevant for mergers and acquisitions, international stakeholders, and for foreign subsidiaries operating under multiple sets of accounting standards (PWC, 2013).

History of Convergence

The U.S. GAAP are set by the Financial Accounting Standards Board (FASB). Since 2002, the FASB and IASB have been working on the convergence process, going through the two sets of accounting standards individually to determine how they can be converged (IFRS, 2013). The latest updates on the convergence process were released in 2013, along with a timeline to address the remaining issues. Other bodies, in Commonwealth countries mainly, are keeping close watch on the convergence process and thinking about how this convergence will affect their own convergence processes.

Recent Developments

The convergence process is taking longer than originally anticipated, because there are significant differences in many individual issues that are difficult to reconcile. In 2013, the process reached a point where it appears that perhaps multiple sets of standards of going to need to coexist for the foreseeable future until the final issues are hammered out.

One recent development is that in early 2013, the IFRS Foundation created the Accounting Standards Advisory Forum (ASAF) "to broaden the scope of the IASB's collaborative efforts" (FASB, 2014). This board includes members from countries that currently do not use IFRS, including Australia, Canada, Japan, China and South Africa. This board will meet regularly to help guide the final stages of international convergence (IFRS Foundation, 2014).

There are four outstanding areas that are causing the most difficulty in the convergence process. These are revenue recognition, leases, financial instruments, and insurance. There is a process being developed to tackle each of these issues in turn. Revenue recognition in particular has been a challenge for policymakers in recent years. There are significant conceptual differences between IFRS and U.S. GAAP on the issue of revenue recognition, and the new system might need to simply choose one or the other, rather than attempting to integrate both (Wustermann & Kierzek, 2005). It has been noted -- and this is a significant concern -- that while the costs of the proposed convergence will be borne by all U.S. companies, the benefits of IFRS-style revenue recognition will accrue mainly to multinationals, something that harms small business growth opportunities (Hail, Leuz & Wysocki, 2010).

Further research has indicated other issues with IFRS that are of concern to U.S. regulators, in particular to the Securities Exchange Commission. There is concern that IFRS has a higher variance of net income changes, higher change… [read more]


Tax Letter the IRS Restructuring Research Paper

Research Paper  |  2 pages (624 words)
Bibliography Sources: 2

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c). The Internal Revenue Service is to embrace a Policy for Taxpayer Acceptance of Offers-In-Compromise as well as Agreements Installment

The Internal Revenue Service is, in general terms, prohibited from levying on the property (or right to the same, thereof) of a taxpayer to effect tax collection while there is a pending installment agreement or offer-in-compromise -- with an offer-in-compromise being "the Internal Revenue Service term for settlement" (Berson, 2001, p. 1-70). To settle his/her deficiency, the tax payer can, in some cases and as per the provisions of the Act, call upon the Internal Revenue Service to enter into an installment agreement. This Act permits the Internal Revenue Service to exercise greater flexibility in instances where the taxpayer is unable to settle his/her deficiency.

d). Internal Revenue Service Reorganization

One of the key highlights of the Act is the Taxpayer Bill of Rights 3. In what could be seen as a move to eliminate IRS' excesses, this particular bill of rights has in place provisions that offer taxpayers extensive protections. For instance, in addition to having the burden of proof in civil tax disputes shifted to the government, some provisions seek to further expand the confidentiality of communications between attorneys and their clients to some tax advisors -- i.e. those that are federally authorized. What this means is that tax advisors may not divulge the secrets of their clients, nor may they be forced to do, as long as the privilege is deemed applicable.

References

Berson, S.A. (2001). Federal Tax Litigation. New York, NY: Law Journal Press.

United States General Accounting Office. (2002). IRS Management: IRS Faces Challenges as it Restructures…… [read more]


FASB Statements Article Review

Article Review  |  4 pages (1,146 words)
Bibliography Sources: 4

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Additionally, this statement eliminated the concept which helped a transfer qualify as a special purpose-entity. That meant that organizations which had used such exemptions prior to 2009 need to reevaluate how they report such transfers from here on out.

Just like the previous statement, FASB 167 is also related to the redefinition of specially considered entities, such as variable interest entities. Known as the "Consolidation of Variable Interest Entities," the statement aimed to improve on how these entities dealt with financial reporting. Originally described in Statement 46 in 2003, the new statement released in 2009 collaborated with Statement 166. This augmented how organizations need to handle variable interest entities. It is also related to a special purpose entity. Essentially, the variable interest entity refers to an investee that does hold a majority interest, but one that is not based on the rights associated with voting activities. In this definition, the equity which is at risk is not enough to support the entire entity's activities and where the risk holders cannot control the activities of the entity at hand.

FASB Statement 167 aims to better clarify how to deal with such variable interest entities. It improves on the earlier statement to better define their construction and how companies need to consolidate them if that company is the primary beneficiary. Essentially, the organization or risk holder that is the biggest beneficiary of groupings of variable interest entities must consolidate them in regards to financial statements and activities. The traditional definition of special purpose entities was eliminated in Statement 166. Therefore, Statement 167 reconstitutes a new definition to be used for general accounting purposes. This then forces the most benefiting share holder within such entity groupings needs to receive all benefits, but also all risks. These benefits and risks are then absorbed into the larger entity grouping for accounting purposes.

FASB Statement 168

FASB Statement 168, "FASB Accounting Standards Codification, officially replaces the coding system of FASB Statement 162. It is the primary source of codification authority for GAAP principles used here in the United States. These codes are applied to all organizations that are considered nongovernmental entities. It replaces all other previous coding structures within this category of organizations. Only those standards that have been grandfathered in will remain active under the new codification structures. This was effective as of September 15, 2009. It replaces the 2008 statement, "The Hierarchy of Generally Accepted Accounting Principles," or Statement 162. Yet, it is similar to the previously used codification system, with important changes in areas where there were open questions left by the previous statement.

This does strengthen the authority of the FASB in regards to establishing a hierarchy of codification rules and regulations. Outside auditors thus have lost some power in the decision making process, as they now must adhere to the hierarchy standards set forth and dictated by the FASB. All nongovernmental entities are thus under the authority of the Codification as presented by the FASB. Here, there are two levels, authoritative… [read more]


Identify One of the Examples of Financial Reporting Misconduct Associated With the Enron Scandal Term Paper

Term Paper  |  3 pages (881 words)
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Also, because of the nature of the Enron corporation, as an energy company, its operations had an effect on the price of energy in a manner which directly affected consumers both through their purchasing of the commodity on the open market and also the contribution high energy prices make to rising costs of others goods and services.

The management of Enron, in contrast, had a considerable incentive to hide all losses. This protected their jobs on the board of directors and their bonuses. To a lesser extent, the accountants did as well -- they wanted to keep Enron's business for their firm, even though the ethical revelations later resulted in long-term losses which were not really worth the short-term gains.

Q3. From a deontological as well as a utilitarian perspective, what would have been the more ethical course of action?

Deontology suggests that principles, more so than anticipated consequences, are what matter when judging the moral value of an action. From a deontological perspective, the possibility of enhancing the appearance of the company' finances should never have been an issue in the first place. All that matters is doing what is right according to moral principles. This means that even creating the appearance that a company is more profitable than it is, is wrong, despite the fact that this might theoretically increase share prices and enrich the company.

From a utilitarian perspective, the ethical principle at stake is the need to do "the greatest good for the greatest number of people." This means that the idea of eternal moral principles that cannot be violated holds little persuasive sway for a utilitarian. Fudging facts and figures might be acceptable if they produce a beneficial results -- for example, if they result in substantial material benefits to employees and shareholders yet do not hurt the public at large. However, even from this less explicitly moralistic rubric, the actions taken were still wrong. Although they improved short-term profits, in the long-term they ultimately damaged the health of the company.

Enron is an example of how even from a utilitarian perspective that emphasizes results, when ethics are compromised quite often the long-term health of the company is damaged. The only persons to profit from Enron's actions were its managers and the narrow leadership base, not its lower-levels, employees, and certainly not the public. The reputation of the accounting firm which helped Enron do its dirty work was also damaged.

References

Folger, J. (2011). The Enron collapse: A look back. Investopedia. Retrieved from:

http://www.investopedia.com/financial-edge/1211/the-enron-collapse-a-look-back.aspx

Special Purpose Vehicle/Entity - SPV/SP. (2014). Investopedia. Retrieved from:

http://www.investopedia.com/terms/s/spv.asp… [read more]


Financial Analysis Ratios Essay

Essay  |  9 pages (2,702 words)
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Ratio and Financial Statement Analysis

The topic for this essay is ratio and financial statement analysis. It is meant to show and analytically examine the benefits and confines of ratio analysis by elucidating what factors impact the significance of such methods and what new theories or practices may be developing regarding the presentation and application of ratio and financial statement… [read more]


Looking Into an Annual Report Data Analysis Chapter

Data Analysis Chapter  |  4 pages (1,097 words)
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¶ … Annual Report

The 2013 financial year was a mixed one for International Business Machines. To begin with, the operating EPS (earnings per share) of the company rose to $16.28, the highest ever. The EPS growth for the eleventh year in a row for the company helped reach this figure. In addition, the operating net income increased by 2% reaching the $18 billion mark. However, despite these positive achievements on one hand, there are negative experiences, too, for the company. To begin with, the income generated before tax declined by 8%. In addition, the revenue generated by IBM decreased yet again by 5% reaching $99.8 billion. The company has to focus on these aspects in order to improve its financial performance. In analyzing the annual report, I have learnt that one of the main things that the company has to undertake encompasses a shift in its hardware business for new prospects and actualities. The other challenge encompasses targeting the emerging economies across the world. Despite the fact that the company's growth in Latin America and Middle East and Africa was strong and considerable, enterprise outlay decelerated in other strategic growth markets (IBM, 2013). With respect to the forthcoming periods, IBM plans on utilizing the cloud to reinvent key business procedures and for innovation purposes. In particular, the company has announced that it will be investing $1.2 billion towards the expansion of a huge network of local cloud hubs for companies and entities across the globe. In addition, the company anticipates additional growth in its mobile, social and security portfolio. In 2013, the company experienced a 69% growth in mobile, 45% growth in social businesses and 19% growth in security (IBM, 2013).

IBM Common Size Income Statement

2013

2012

2011

Revenue (services)

57,655

59,453

60,721

Cost (services)

37,564

65.15%

39,166

65.88%

40,740

67.09%

Gross profit (services)

20,091

34.85%

20,287

34.12%

19,981

32.91%

Revenue (sales)

40,049

43,014

44,063

Cost (sales)

12,572

31.39%

13,956

32.45%

14,973

33.98%

Gross profit (sales)

27,477

68.61%

29,058

67.55%

29,090

66.02%

Revenue (financing)

2,047

2,040

2,132

Cost (financing)

1,110

54.23%

1,087

53.28%

1,065

49.95%

Gross profit (financing)

45.77%

46.72%

1,067

50.05%

Total revenue

99,751

104,507

106,916

Total cost

51,246

51.37%

54,209

51.87%

56,778

53.11%

Gross profit (total)

48,505

48.63%

50,298

48.13%

50,138

46.89%

Less expenses

Selling, general and administrative

23,502

23.56%

23,553

22.54%

23,594

22.07%

Research, development, engineering

6,226

6.24%

6,302

6.03%

6,258

5.85%

Intellectual property and custom development income

-882

-0.88%

-1,074

-1.03%

-1,108

-1.04%

Other (income) and expense

-327

-0.33%

-843

-0.81%

-20

-0.02%

Interest expense

0.40%

0.44%

0.38%

Total expenses and other (income)

28,981

29.05%

28,396

27.17%

29,135

27.25%

Income before taxes

19,524

19.57%

21,902

20.96%

21,003

19.64%

Provision for income taxes

3,041

3.05%

5,298

5.07%

5,148

4.81%

Net income

16,483

16.52%

16,604

15.89%

15,855

14.83%

Table of Ratios

Ratios

2013

2012

Gross Profit Margin

48.63%

48.13%

Net Income Margin

16.52%

15.89%

Equity Ratio

18.17%

15.92%

Gearing Ratio

Debt/Liability Ratio

Current Ratio

1.278826518

1.13313467

Quick Ratio

1.221298003

1.080710602

Return on Assets

13.06%

13.93%

Return… [read more]


Vocabulary and Practice of Organizational Finance Thesis

Thesis  |  3 pages (751 words)
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¶ … Standard Financial Statements: A Case Study

Like most global companies, the microprocessor and graphics products manufacturer and marketer AMD suffered during the recession in 2008, though the company did not fair as poorly as many others. Between sales declines on one hand and major restructuring on the other, the company's financial statements suggest an entity with a great deal of staying power that definitely took some losses in 2008 yet remains profitable, innovative, and poised for growth when the market wile bar it. A somewhat deeper analysis of the company's annual report also demonstrates how AMD uses and reports its financial information, to the public and its investors as well as internally in its decision-making.

Informing Investors

The letter at the beginning of the annual report from CEO and president of AMD Dirk Meyer sets the tone for the interpretation of the financial data that appears later in the report -- some passages, in fact, appear to be repeated wholesale later on. This is especially true of the repeated invocations of the global recession, which is used as a background explanation for all company losses and most the organization's actions during 2008 (Meyer 2009). Though this recession undoubtedly had an impact on the company, and indeed was likely the primary cause behind the falling numbers witnessed by AMD in 2008, it also quite clearly becomes a form of spin within the annual report to assuage investor worries concerning the company's financial strength and fortitude in the near future.

Other financial information is presented in an equally leading manner; though not inaccurate or even untruthful, the presentation of financial information to investors in the company's annual report is unabashedly aimed at minimizing any culpability on the part of the organization for its losses while extolling the decisiveness and pragmatism of the company's reactions to the global recession. The contractual obligations that the company must meet in the near-term, for instance, are quite complex in their ultimate effect on the company and relative to AMD's current financial position. Yet they are presented in what appears to be a very straightforward table that indicates greatly reduced obligations within the next five years, which is borne out by the length explanation that follows (AMD 2009, pp. 75-84).…… [read more]


Evaluating the Performance of a Business Thesis

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Performance of a Business

The overall performance of a firm must be measured against the firm's objectives. One objective is certain -- the firm exists to maximize shareholder wealth. The other objectives should be defined by management. These will vary depending on the firm. Metrics used can include market share, customer growth, or revenue growth. There can be non-financial measures as well, including those related to goals on ethics, corporate social responsibility and environmental stewardship.

As Milton Friedman (1970) famously wrote, the primary obligation of business is to maximize profit. The shareholders are the owners of the firm and management is the agent of the shareholders. Thus, measuring the success of management involves measuring the growth of the equity in the firm. If shareholder wealth is maximized, then management has been successful.

Kolstad (2007) argued, however, that maximizing shareholder wealth is not necessarily the ideal goal over a specific period of time. While it is true that business should maximize shareholder wealth over the long-run, the focus on wealth maximization over the short run can lead to a failure to maximize wealth in the long run. What this implies is that over any given period of time, there may be better and more firm-specific measures of success. These measures should relate to the long-run goal of wealth maximization. However, in the short run it may be more important to build market share, build revenues, improve corporate ethics or even demonstrate environmental leadership.

Thus, I would use net profit and equity gains as two financial measures, but would incorporate a variety of other measures that, when aggregated, will contribute in the long run but not necessarily in the short run to building equity growth and improving long-run profits.

Q2. The firm's financial statements can reveal a significant amount about the firm's operations. The quality of the firm's cash flows, earnings streams, balance sheet and other metrics can be measured against other firms in the same industry, and against the firm's past performance. This will yield sound…… [read more]


Subsidiary Consolidation the Necessity and Effects Essay

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Subsidiary Consolidation

The Necessity and Effects of revisions Concerning the Circumstances in which Subsidiaries are Excluded from Consolidated Reporting

Of the many changes to financial reporting methods enacted over the past decade, one of the seemingly most unnecessary is the change that has been made to the exclusion of subsidiaries from consolidated financial reporting. The legislation on this point has seemingly taken steps in both directions, mandating consolidated reporting in some instances that previously excluded subsidiaries from such reporting, and the IASB has proposed additional changes that would complicate which portions of a subsidiary's value -- whether presumed or actual -- can and should be included on a consolidated financial report form a controlling entity (Shortridge & Smith 2007). There is a great deal of disagreement as to how much this truly affects the accuracy of financial reporting from consolidated entities, and there is also understandable disagreement regarding the direction and degree of distortion that the changes to consolidated reporting rules may have created.

This distortion is understandable due both to the complexity and the seeming bi-directionality of the changes made. Certain circumstances that previously prevented consolidated reporting or allowed companies not to include subsidiaries in their consolidated financial reporting have been changes so that corporations are now required to report consolidated earnings under a broader range of circumstances (CPA Class 2009). At the same time, proposals for certain other exclusions based on percentages of ownership and the actual amount of control exerted on a subsidiary by a controlling company would affect which portions of a subsidiary's assets are listed on consolidated reports (Shortridge & Smith 2007).

First, an examination of the changes that have already been made to consolidation practices in financial reporting concerning subsidiaries is necessary in order to come to an understanding of the current situation. Previously, subsidiary companies -- those in which a controlling entity owned more than fifty-percent of the outstanding voting shares of stock or a majority voting interest by some other means -- were to be included in consolidated financial reports unless they were a foreign operation, if there was a large minority interest in the subsidiary company, if the operations of the controlling company and the subsidiary company were considered on-homogenous (e.g. A manufacturing subsidiary owned by a financial services company), or if significant doubts existed about a controlling interest's actual ability to exert control over the subsidiary (CPA Class 2009).

The modifications made to financial reporting policy generally eliminate most circumstances under which subsidiaries would not be included in consolidated…… [read more]


Corporate Scandals the Enron Scandal Emerged Thesis

Thesis  |  1 pages (386 words)
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Corporate Scandals

The Enron scandal emerged in 2001 as it became apparent that the energy trader was overwhelmed by its debts. Corporate failure alone is no cause for scandal, but in this case Enron had undertaken a variety of illegal activities. They had kept key transactions off of their books, thereby hiding losses from investors and regulators (Wee, 2001).

Enron executives misused data to perpetrate their fraud. At the company, they were aware that many of their activities were either outright illegal or at least ethically questionable. Enron management actively obfuscated data and ignored warnings from internal whistleblowers. This made more difficult the already complicated analysis of Enron profitability data by its auditors. Ultimately, though the auditors, Arthur Andersen, joined in the obfuscation (Thomas, 2002). The result was that Enron was able to hide billions of dollars of debts from investors. When the debt was uncovered, Enron eventually went out of business and its executives faced criminal prosecution, many landing in jail (Houston Chronicle, 2001-2009).

The Enron case illustrates the limitations of data. The ability of outsiders to analyze Enron data was limited by the data that they received. Outsiders felt that the…… [read more]


Bookkeepers Are the Ones That Work Term Paper

Term Paper  |  1 pages (315 words)
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¶ … bookkeepers are the ones that work with T-accounts and journal entries. This information, therefore, is already complete when the accountant takes over and works with the numbers. However, it is very important for accountants to have a strong understanding of both the journal entries and the T-accounts. If they do not have this knowledge they will not be able to catch mistakes that might have been made by the bookkeeper. Accountants often prepare complicated documents and provide a great deal of financial information for companies. These companies use that information in many areas such as taxes, payroll, insurance payments, bonuses, paying bills, and others. Because of this, the information provided to them by the accountant needs to be accurate. This information, though, is only as accurate as the figures that the accountant was provided with.

If the accountant does not understand how journal entries and T-accounts work and are supposed to be calculated and presented,…… [read more]


Caterpillar Finance Term Paper

Term Paper  |  2 pages (558 words)
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Caterpillar Finance

Report on the Financial Health of Caterpillar, Inc.

This report will contain discussion of the financial condition and performance of Caterpillar Inc. In the fiscal year 2011. This discussion will include key ratios and will also include a comparison of our performance with industry norms.

In terms of liquidity, there are three key ratios that need to be taken into consideration -- the current ratio, the quick ratio and the cash ratio. The current ratio for Caterpillar is 1.33, the quick ratio is 0.82 and the cash ratio is 0.1. The industry averages for the current and quick ratios are known. They are 1.6 and 1.1 respectively. Thus, Caterpillar is underperforming its industry peers.

The profitability ratios are the gross margin, the operating margin and the net margin. For the fiscal year 2011, these were 27.5%, 11.8% and 8.2%. The industry averages for these measures are 32.7%, 13.3% and 9.85%. Again, Caterpillar lags the industry on these averages.

The important solvency ratios are the debt ratio and the long-term debt to equity ratio. The debt ratio is 83.5% and the ratio of long-term debt to equity is 1.92. The industry averages for these figures are 1.01 for debt/equity, which equate to 50.25% debt and 49.75% equity. Clearly, most firms in the industry have less debt than we do. All in all, our financial performance lags the industry in every key metric.

The company has been profitable for the past five years, so there is little excuse for this type of financial underperformance. The company's liquidity has actually improved, compared with where we were five years ago, when we had a current ratio of 1.14. The past year,…… [read more]


Success in MBA Program Term Paper

Term Paper  |  2 pages (660 words)
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¶ … worked as an accountant. Those thirteen years have taught me more than how to work with numbers. They have also taught me that behind every tax form is a human face, and the individual nature of every client and every organization's financial needs. Of course, most people who come to an accountant's office wishes to maximize his or her organization's profits, or minimize his or her contribution to the IRS, or at the very least deploy his or her financial profile in the most creative and fruitful fashion possible. All clients, for the most part, have rational economic goals, which it is the accountant's professional responsibility to facilitate in the most ethical and efficient fashion possible. But these goals vary from organization to organization, and individual to individual, and an accountant must be cognizant of these differences, in the service of his or her client, as well as to be versed in the protocols of the profession.

Thus, my work has not simply sharpened within me the weighty responsibilities of working in the real world, and the need to maintain a strong code of ethics and commitment to my clients, who depend upon my basis of expertise as a fount of professional advice and expertise. It has taught be about my profession in general, namely that accountancy is partly psychology, partly about a talent working with numbers, and also requires the accountant to learn from the business world and to keep an eye on the development of the larger economic environment. One must be in a constant state of learning, to be a good accountant. One learns as well as aids every client that walks through the door.

I wish to gain my MBA to enhance my own educational experience, of course, and to expand my professional credentials, ultimately with the aim of taking my CPA exam after graduation. But I see getting an MBA not simply as adding another bullet point to the list of educational attributes…… [read more]


Account Describe How Accounts Receivable Arise Essay

Essay  |  1 pages (372 words)
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Account

Describe how accounts receivable arise and how they are accounted for, including the use of a subsidiary ledger and an allowance account.

Accounts receivable arise from credit sales to customers. Accounts receivable are reported at their realizable value, which is their total amount less an estimate for the amount of uncollectible accounts. Accounts receivable are also recorded into an accounts receivable subsidiary ledger that separately lists amounts owed by individual customers. Example: X company sells its products of $1,000 to Y, and y assures that he will pay the same in the time period of 30 days then the accounts receivable are debited and sales are credited for the same amount i.e. $1,000.

All the balances of accounts receivable are transferred to the general ledger, and the subsidiary ledger is used to verify the general ledger. The subsidiary ledger is called the control account as it mentions all the details of accounts receivable of the company which is stated customer wise. It helps in giving a clear picture of amount that the company is likely to receive. The two general ledger accounts that act as…… [read more]


Holly Fashion Essay

Essay  |  2 pages (531 words)
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BS - Tableau

Balance Sheet of the Holly Fashions Company: 2003-2006 Apple Inc. Income Statement Holly Fashions Income Statements: 2003-2006

(in 000s) (in millions) (in 000s)

mos to

2003 2004 2005 2006 Fiscal years ended Sept 26, 2010 6/25/11 2010 2009 2008 2007 2006 2003 2004 2005 2006

ASSETS: Net sales 79,979 65,225 42,905 37,491 24,006 19,315 Sales 985.0-1,040.0-1,236.0-1,305.0

Cash 40.4-51.9-38.6-10.6 Cost of sales 47,541 39,541 25,683 24,294 15,852 13,717 Cost of Goods 748.6 774.8 928.2 978.8

Receivables 153.2 158.9 175.1 224.8

Inventory 117.0 121.1 193.4 191.9 Operating expenses: Gross margin 236.4 265.2 307.8 326.3

Other current assets 5.9-6.2-7.4-7.8 Research and development 1,784 1,782 1,333 1,109 782 712

Total current assets 316.5 338.0 414.5 435.1 Selling, general, and administrative 5,574 5,517 4,149 3,761 2,963 2,433 Operating expenses:

Administrative 169.4 202.8 236.1 249.3

Gross fixed assets 44.8-58.9-78.1-96.4 Depreciation 10.8-11.4-13.6-14.4

Accumulated depreciation (12.0) (23.4) (37.0) (51.4) Total operating expenses 7,358 7,299 5,482 4,870 3,745 3,145

Net fixed assets 32.8-35.5-41.1-45.0 Operating income 56.1-51.0-58.1-62.6

Interest 7.0-6.0-5.0-4.0

Total assets 349.3 373.5 455.5 480.1 Provision for income taxes 6,115 4,527 3,831 2,828 1,512 829

EBT 49.1-45.0-53.1-58.6

LIABILITIES & NET WORTH Net income Taxes 19.7-18.0-21.2-23.5

Accounts payable 53.8-54.7-86.2-84.2

Debt due 10.0-10.0-10.0-10.0 Net income 29.5-27.0-31.9-35.2

Accruals 19.7-26.0-24.7-26.1

Total current liabilities 83.5-90.7 120.9 120.3

Long-term debt 60.0-50.0-40.0-30.0

Total liabilities 143.5 140.7 160.9 150.3

Common stock 150.0 150.0 180.0 180.0

Retained earnings 55.8-82.8 114.6 149.8

Total net worth (shareholders equity) 205.8 232.8 294.6 329.8

Total liabilities & net worth 349.3 373.5 455.5 480.1

IS - Tableau 1

Holly Fashions Income Statements: 2003-2006

(in 000s)

2003 2004 2005 2006

Sales 985.0-1,040.0-1,236.0-1,305.0

Cost of Goods 748.6 774.8…… [read more]


Proctor and Gamble Term Paper

Term Paper  |  2 pages (640 words)
Bibliography Sources: 2

SAMPLE TEXT:

A major sales and admin cost is the marketing. The costs in the income sheet will also include the deprecation cost for capital assets, both tangible, such as property, and intangible, such as good will.

Question 2

An examination of the income statement and the balance sheet shows a firm that is growing and in 2014 was able to increase its' overall sales and operating efficiently despite increased cost for the direct inputs (cost of products sold). The revenues increased from $82,581 million in 2013 to $83,062 million in 2014. The cost of goods increased, in 2013 it was 50.12% of the net revenue, and in 2014 it was 51.11%. However the firm found efficiencies elsewhere as the cost of the selling and admin fell despite the increase in the net revenues falling from $26,552 million in 2013 to $25,314 million.

The income statement and the balance sheet show that the firm has increased its' debt, on the income statement there is a higher level of interest paid, and on the balance sheet the long-term liabilities has increased. As there are earnings classified as coming from discontinued operations, we can also assert that there has been the closing, of divesture of some operations. Overall net profit, both before tax and after tax has increased, and it is likely that shareholders will be happy as the earnings per share have also increased from $3.89 in 2013 to $4.01 in 2014, and there has also been an increased dividend, which is a positive sign and may also be interpreted as management indicating they believe the growth will continue. The balance sheet also reflects the growth, as well as the increase in debt there is also an increase in the shareholders equity.

References

Proctor & Gamble Co, (2014), Annual Report, accessed…… [read more]


Value of a Business Case Study

Case Study  |  2 pages (548 words)
Style: MLA  |  Bibliography Sources: 1

SAMPLE TEXT:

¶ … investment and speculation. Investment is forecasting the future yield of an asset over the life of the asset. Speculation is merely attempting to predict the near-term movement of price. It appears that management at M&M Pizza is attempting to appease the short-term speculative crowd at the expense of long-term shareholders.

To begin, management should only repurchase shares when they do not have any positive NPV projects to conduct within the firm. Cash should be used on these high NPV projects before any form of stock buyback. By compounding investor dollars internally through high NPV projects, the company is better able to generate higher shareholder returns through high cash flows. By deploying cash in high NPV projects, management is looking longer term. In essence, management is spending cash today in an effort to garner more cash in the future, thus enhancing shareholder value over the long-term. The proposed stock buyback however, is attempting to increase earnings per share through a simply reduction in the overall shares outstanding. This is only advantageous if management believes the shares are undervalued. There is no indication within the case the shares are actually undervalued relative to their intrinsic value. It is quite plausible that the shares have lagged because they were simply overvalued over the time period over served. Investors realizing that the shares were overvalued may have simply elected for business prospects to catch up to the share price. Moe Miller seems to be avoiding the simply notion of value when conducting share repurchased. If Moe Miller repurchases overvalued shares, he is actually destroying shareholder value. The share price indicated in the case is $25. Using…… [read more]