...Upon examination of Ultramares, certain criteria may be gleaned. Before accountants may be held liable in negligence to noncontractual parties who rely to their detriment on inaccurate financial reports, certain prerequisites must be satisfied: (1) the accountants must have been aware that the financial reports were to be used for a particular purpose or purposes, (2) in the furtherance of which a known party or parties was intended to rely, and (3) there must have been some conduct on the part of the accountants linking them to that party or parties, which evinces the accountants’ understanding of that party or parties’ reliance. While these criteria permit some flexibility in the application of the doctrine of privity to accountants’ liability, they do not represent a departure from the principles articulated in Ultramares, but, rather, they are intended to preserve the wisdom and policy set forth therein. In the appeal we decide today, application of the foregoing principles presents little difficulty. The facts as alleged by plaintiffs fail to demonstrate the existence of a relationship between the parties sufficiently approaching privity. While the allegations in the complaint state that Smith sought to induce plaintiffs to extend credit, no claim is made that Andersen was being employed to prepare the reports with that particular purpose in mind. Moreover, there is no allegation that Andersen had any direct dealings with plaintiffs, had specifically agreed with Smith to...
Words: 252 - Pages: 2
...INTRODUCTION In the United States, there are two separate court systems: State and Federal. The two court systems were made to keep State and Federal matters separate. Under the State court, legislatures were able to generate a variety of laws. The following will review on how the State of California came and how the system relates to the people today. Although both branches are equally as important, this paper is going to outline the basic structure of California’s court system. The following will explain the jurisdiction (authority to hear cases) of these various trial courts, and specifically explain in what trial court(s) in the state you would file specific types of claims. Additionally, I will explain the structure of the appellate courts in California, naming each level of the appeals court. HISTORICAL DEVELOPMENT OF STATE COURTS A State court will differ from all 50 states. If one were to look at the capitols of each state, there of course is a state court in each one. All were made at different times, therefore making each state different from one another. At the start of the 13 colonies, the head of the state was not voted on (as voting was not created yet), but merely decided upon by the king. However, the three key branches of the court system were not decided yet since the governor had control and power. As centuries have changed, so did those who practiced law. Those who studied law became more abundant, and the old way of the courts were starting to be...
Words: 651 - Pages: 3
...(SOX), a new era of stakeholder expectations was crystallized for the business world and particularly for the professional accountants that serve in it. The drift away from the professional accountant’s role as a fiduciary to that of a businessperson was called into question and reversed. The principles that the new expectations spawned and renewed resulted in changes in how the professional accountants are to behave, what services are to be offered, and what performance standards are to be met. These standards have been embedded in a new governance structure and in guidance mechanisms, which have domestic and international components. The influence of the International Accounting Standards Board (IASB) and the International Federation of Accountants (IFAC) will be as important as that of SOX in the long run. This chapter examines each of these developments and provides insights into important areas of current and future practice. Building upon the understanding of the new stakeholder accountability framework facing clients and employers developed in earlier chapters, this chapter explores public expectations for the role of the professional accountant and the principles that should be observed in discharging that role. This leads to consideration of the implications for services to be offered, and of the key “value added” or competitive edge that accountants should focus their attention on to maintain their reputation and vitality. Sources of ethical governance and guidance are...
Words: 62999 - Pages: 252
...Case #1: Triple H Film Productions Part 2: MANAGEMENT ISSUES A. i. What is a company? A voluntary association formed and organized to carry on a business. Types of companies include sole proprietorship, partnership, limited liability, corporation, and public limited company. Implication of Limited Liability: Limited Liability Companies, much like corporation, provide protection for their owners. If the organization has debts that it cannot pay, the individual owners will not be held responsible for those debts. If the organization has to file bankruptcy the individual owners are still not personally responsible for any of the liabilities that the organization has. Owners can choose to have profits distributed anyway they would like. This means, whatever percentage of profits they want to give to each member, they have the flexibility to do so. Reduction in paperwork. The tedious meetings and note-taking that are required by corporate entities are not required by an LLC. There are no board meetings or quarterly meetings required. There are no quarterly or semi-annual reports that are necessary for the IRS. There is no double taxation. You do not have to pay taxes on your corporate profits, as well as on profits that pass through to your members. You only pay taxes once, and that is on those profits that are given to individual members Longevity of the company is based on the life of the members. The company will dissolve if a member goes bankrupt or passes...
Words: 2208 - Pages: 9
...That's Summa Story! From the oaves to Cafe Paoioli By Derry Cotter, FCA Accountants are generally recognised as making a valuable contribution to society, by providing the information that allows entrepreneurship to flourish, business to operate efficiently, stakeholders' interests to be protected, shares to be fairly priced, and taxation and audit requirements to be satisfied. Accounting, however, has not always enjoyed such an established position, and today there is often a tendency to take our profession's status for granted. It is interesting, therefore, to examine the factors that have brought accounting to the preeminent place that it occupies today. Our story begins in primitive times, when cave dwellers collected enough food to satisfy their daily requirements. Before long, the more enterprising among them would set aside some for future use. In effect that was surplus capital, and it represented the first step towards the accumulation of wealth. Soon, they 50 were exchanging their surplus for commodities owned by different cave dwellers. This exchange, which constituted a form of barter, was the first step in the development of a system of commerce.' Record keeping is thought to have begun around 4,000 BC in Babylonia and Assyria. Chatfield- describes the Babylonians as obsessive bookkeepers, with records being kept by scribes, who are regarded as the predecessor of today's accountants. Hundreds of scribes were recruited by the governments of Babylonia to record...
Words: 2287 - Pages: 10
...they paint different picture and thus convey different images. Creativity in company accounting may arise under at least three different financial market conditions. The first is when a company floats its shares to attract investors to subscribe to such shares either at par or at a premium, depending on the financial market evaluation of the company’s future prospects. The second is when the company whose shares are already listed in a stock exchange, wants to paint an attractive picture of its financial conditions so that the shares may be quoted at a premium. Finally, a company having its shares listed in the stock exchange may declare and pay high dividends based on inflated profits through overvaluation of assets, undervaluation of liabilities and change in systems of stock valuation that may boost the image of the company at least in the short run. Unethical considerations in creative accounts have developed to such depths that terms like fraud audit and forensic accounting have gained currency and are becoming new professions. Accounting practitioners and auditors are increasingly required to appear in courts for deposition This paper is an outcome of a study of Creative Accounting in Bangladesh and global perspectives. Global scenario is included in the study to illustrate the extent of creative accounting practice. Creative accounting could be a blessing or a curse. It is a blessing where something new is introduced to refine the accounting system and therefore becomes...
Words: 3226 - Pages: 13
...the profession to the crisis of credibility being faced because society perceived accountants to have lost their commitment to public service. The credibility of the profession is threatened when the ideals of integrity, independence, public service and ethical standards come under suspicion. Well-known scandals of one of the major leading accounting firms in the United States Arthur Andersen coupled with alleged unethical acts committed by Enron have arouse the conscious of the public and stakeholders as to the moral decline and unethical posture of public accountants unveiled a decline in moral reasoning and ethical standards of public accountants (Dellaportas, 2006; Esmond-Kiger, 2004). Over the last few years, the accounting profession has been beaten up badly in the media, somewhat justifiably. The forces at work were numerous and complex and a variety of phenomena created the entire profession had its reputation tarnished. Some forces were not new: delivering services that acted to impair independence; becoming too cozy with clients, active participation in finding ways to circumvent accounting standards, and even simple greed. The profession has paid dearly for failing to meet the expectations of investors, creditors, and other users of financial statements. Finally, the public lose their trust and confidence on the accounting profession and thus, the professional standing of accountant is jeopardized. There are several ethical issues faced...
Words: 3627 - Pages: 15
...companies. Errors can be easily made while doing financial statements for a business and admitting as a person that you made a mistake can be difficult for a person. Accounting is a profession that is very dependent by investors that are looking to increase their wealth by investing in successful companies and if the information in the financial statements is misleading it can cause investors to lose a lot of their money if the company is not doing well and the company is hiding information to show that the company is doing good. 3. Has I stated in my previous statement one of the things that can make an accountant really test his ethical behavior is when he asked to tamper with financial statements. Enron is a great example of unethical behavior. Enron created entities to transfer liabilities that it had incur so that it seemed like the company didn’t have liabilities...
Words: 417 - Pages: 2
...INTRODUCTION 1 LIABILITY TO CLIENTS 1 LIABILITY TO THIRD PARTIES 2 LIABILITY TO THE GOVERNMENT 2 SEC v. KEMPISTY and COMPANY 3 SEC v. DELPHI CORPORATION, et al., (PAUL FREE, CPA) 5 SEC v. JASPER 6 LIMITED ACCOUNTING-CLIENT PRIVILEGE 7 CONCLUSION 9 REFERENCES 11 INTRODUCTION Accountants have responsibilities to act in the interest of three different parties. 1. Their clients 2. Third parties 3. The government In this paper, I will outline the duties accountants owe to each party, examples of how accountants breach duties to each party, and additional obligations accountants have to each and all of the three parties. LIABILITY TO CLIENTS Anyone from Fortune 500 corporations to low-income individuals can become accounting clients. A person or entity need only to enlist the professional services of an accountant via a contract to become a client. The contract may require the accountant to perform an audit, complete federal and/or state tax returns, give a consultation regarding business formation and financial planning, or a wide host of other accounting functions. Beatty and Samuelson explain how an accountant must execute their contracts with their clients with, “a degree of skill and competence that an ordinarily prudent accountant would under the circumstances (2010).” We may consider this concept the idea of due professional care. Beatty and Samuelson also write that because accountants hold a position...
Words: 3166 - Pages: 13
...Contents 1. INTRODUCTION..................................................................................................................... 2 1.1 Luca Pacioli: Father Of Modern Accounting ...................................................................................... 2 1.2 19th Century – The Beginnings of Modern Accounting in Europe and America ............................... 3 1.3 20th Century – The Development of Modern Accounting Standards................................................. 4 1.4 21st Century – Accounting Regulation in Modern Commerce ........................................................... 4 2. DEVELOPMENT OF ACCOUNTING .................................................................................. 4 3. EVOLUTION OF ACCOUNTING ......................................................................................... 5 4. THE CONSEQUENCE OF DOUBLE ENTRY ..................................................................... 6 5. RECENT GROWTHS AND DEVELOPMENTS IN ACCOUNTING ............................... 7 6. LOOKING TO THE FUTURE ............................................................................................... 8 REFERENCES .............................................................................................................................. 9 1. INTRODUCTION The main objective of this study is to critically review the Origin, Growth and Development of accounting theories and their impacts on financial reporting...
Words: 4587 - Pages: 19
...offers the most GAAP generally accepted accounting principles. The site is set up so that you can access the topics you’re looking for in a sort of drill down menu type of search. The site is somewhat user friendly in that it offers a tutorial on how to use the site. It also offers several useful functions such as cross-referencing and join-sections. The AICPA sets ethical standards for the accounting profession and U.S. auditing standards for audits of private companies, non-profit organizations and federal, state and local governments. This resource offers tabs with drop down menus; one of which is marked Research under this tab you can find Standards that will take you to the Standard page offering a list of topics on Professional Accountant Standards such as ‘Audit and Attest Standards’, Code of Professional Conduct, Peer Review Standards, and Tax Standards. By clicking on any of these main topics you can access the statement or information you are seeking. This was by far the easiest to understand because of the commonly used format and the language. The AICPA The mission of the FASAB is to develop accounting standards after considering the financial and budgetary...
Words: 770 - Pages: 4
...abstract of the document here. The abstract is typically a short summary of the contents of the document.] | Accountants have a responsibility to a company’s management investors, creditors, outside regulatory bodies and the overall integrity of financial markets. Accountant responsibility, in a definition, outlines who the accountant is working for. Even though an independent accountant may be hired by a company’s management, the responsibility of an accountant is owed to many others as well. The duty to uphold principles, standards and laws of accounting is owed to the companies, stockholders and creditors they account for. Accountants have an ethical responsibility to these entities that rely on their work to be accurate and precise. Accounts must use extreme care and follow established conventions and standards to present the true and fair view of the financial position of a company. Accountants owe the ethical and professional obligations to the previously mentions entities of management, stockholders, investors, creditors and regulatory and taxation authorities. These entities are divided into three groups: clients, third parties, and the government. Clients are people or groups that use the professional advice or services of an accountant. Accounting clients could be small or large business, private parties, individuals or other accounting firms. The accountant-client relationship is unique and has never occupied the same status as the client relationship with other professions...
Words: 2857 - Pages: 12
...Term Paper Kaplan University March 20, 2015 Regulations: Accountants Responsibilities Accountants have many responsibilities in different areas. They have responsibilities to clients, to thirds parties, and to the government. They have a responsibility to know the regulations, rules and laws that have been put in place for accountants. Lastly accountants have a responsibility to perform their obligations and duties by the code of conduct and to the code of ethics. We will start off with the client. The client by definition is the person who pays the professional or organization for services; the person who engages the professional for their advice or services they render. (Legal Dictionary) For these services the client must cooperate with the accountant in every aspect the accountant deems fit, within the scope of their profession. The accountants responsibilities to the client include to act with integrity, objectively, due care, competence, fully disclose any conflict of interest, maintain client confidentiality, disclose fees to client, and serve the public interest when providing financial services, (AICPA code of conduct) Accountants can also have fiduciary duties to a client if the accountant gives advice to a client involving taxes, assessing management or business consulting. Fiduciary is a legal duty to act solely in the best interest of the client. The case below involves an Atlanta-based accountant breaching his fiduciary duty involving client confidentiality...
Words: 2623 - Pages: 11
...users, and exists at the intersection of two important disciplines: (1) accounting and (2) information systems (Bagarnoff, 2008, pg. 1). Knowing and understanding accounting information systems will allow accountants to possess a level of proficiency from using computers and the specialized software required to prepare the necessary financial statements. This paper will describe how information systems are changing the various aspects of the accounting profession. A description of the variety of new technologies and their effect on the accounting process will be also being discussed. Lastly the paper will discuss how these technologies have changed the way tax accounting is performed at Jackson Hewitt. Information systems are changing the various aspects of the accounting profession because it has eliminated the need to create and store enormous stacks of paperwork that has to be kept track of for financial reporting. The effect of accounting technology has been positive for accountants and firms, resulting in financial reports that are constructed faster and contain fewer errors. Information systems are used by accounting firms and departments to store and transmit their information used in financial reporting. Equipment Computers provide a place for accountants to store their company’s accounting data. Scanners can transfer paper receipts, billing, and invoices into digital media that is stored and filed within the computer, and this information can be retrieved...
Words: 974 - Pages: 4
...RAMON RAMIREZ ID#: 1059854 ACG 6026 Prof: Dr. Krishnamurthy Surysekar Discussion Essay “TWO WORLDS ACCOUNTING IS OKAY FOR NOW” By: Ramon Ramirez George Bush Sr. once said“…We are facing with the opportunity to forge, for ourselves and for future generations, a New World Order. A World where the rule of law, not the law of the Jungle, governs the conduct of Nations…A World…in which a credible United Nations can use its peace keeping role to fulfill the promise and visions of the UN founders. ” The world was listening and since then, globalization started to lurk around the hemisphere. Business has gone as usual, yet people ignored the reality that with so many treaties, so many agreements, so many compromises, the Big Wide World as we knew it once, was becoming so small that anyone would hold it in the palm of one hand. Business Globalization, once seemed to be impossible, now a reality of life. Companies throughout the world conduct business and interrelate with each other, regardless of race or culture. The obvious next step is accounting globalization. The Convergence is not a new concept; according to Mark Conmy (2011) “convergence has been discussed for almost a decade...is a done deal.” These words might bring hope to those who expect the changes as a positive solution to a new world order. But, Floyd Norris, in his article “Accounting that comes in flavors, differs from Mr. Conmy. Norris says “The world was supposed to be moving to a single set...
Words: 766 - Pages: 4
