...Depreciation Accounting and Equity Securities Abstract This paper answers questions on depreciation accounting and compares and contrasts GAAP and IASB standards on equity securities. It distinguishes between revenue and capital expenditures and why this distinction is important. There are many different definitions of depreciation and I will present the one used in accounting. It also identifies the factors in determining the annual depreciation of an asset and whether they are objective or judgment based. I will also explain why depreciation is shown as an adjustment to cash in the operations section on the statement of cash flows. There are differences and similarities between the standards set forth through GAAP and IASB on the concept of equity securities. I will present some of these and then discuss which is more consistent when discussing the following topics: conservatism, comparability, relevance, neutrality, representational faithfulness, and physical capital maintenance. Overall, I believe that GAAP sets forth the better standard when it comes to equity securities. Depreciation Accounting and Equity Securities Revenue expenditures are the regular expenses incurred to maintain an asset. They can be matched with revenue from the asset and should be charged to current expenses. Capital expenditures are expenses incurred to increase the future service potential of an asset. They should not be written off and expensed when incurred. Instead, it should be added...
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...CASE 1.12 MADOFF SECURITIES Synopsis A childhood friend summed up the driving force in Bernie Madoff’s life: “Bernie wanted to be rich.” As a youngster growing up in New York City, Bernie realized that Wall Street was the greatest wealth creation machine the world had ever known. So, after graduating from college in 1960, he set his sights on joining the exclusive fraternity that ran Wall Street by organizing his own one-man brokerage firm, Madoff Securities. Madoff was one of the first individuals to recognize that computer technology provided the means to “democratize” Wall Street by establishing a system that made securities trading much more efficient and much cheaper. In the early 1970s, Madoff and several other individuals organized the NASDAQ exchange, which was destined to become the world’s largest electronic stock market. Years later, the NYSE would be forced to follow suit and switch to electronic securities trading. Literally millions of investors have benefitted from the lower transaction costs of electronic securities trading that were in large part a result of the pioneering efforts of Bernie Madoff. Unfortunately, Bernie Madoff will not be remembered as a pioneer of electronic securities trading. Instead, the word “Madoff” will always be associated with the phrase “Ponzi scheme.” Although his stock brokerage firm was extremely lucrative, Madoff eventually established a parallel business, investment advisory services. Over a period of several decades, Madoff...
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...quarterly statement of his privately-held company. Those quarterly statements are for the bank that his company has the line of credit, those statements have to look good so that the bank approve their credit. There are two big problems in the case. The first one is the as he started on the company he had to sign the closing of the prior fiscal year. If the fraud was being made in the last year, he could be treated like an accessory to the fraud because he signs the statements. The other problem is that the CEO and CFO, the highest in command, are the ones that are committing the fraud. I would recommend that the caller has to report the fraud to the FASB. The Financial Accounting Standards Board (FASB) has been the designated organization in the private sector for establishing standards of financial accounting that governs the preparation of financial reports by nongovernmental organizations. Those standards are officially recognized as authoritative by the Securities and Exchange Commission (SEC) and the American Institute of Certified Public Accountants. If the caller continues to work in the company he could get caught committing the fraud and could go to jail. There are two risks if he resigns immediately. The first one is that he already signed the year-end state, and he could serve as an accessory if the fraud was committed that year. The second one is that he could get retaliation for his former co-workers and don’t get work in any other company. The SBA will be a perfect...
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...Case Analysis ABC Corporation - Write a two to three page discussion paper ABC Corporation is a large multinational audit client of your CPA firm. One of ABC's subsidiaries, XYZ, Ltd. is a successful electronics assembly company that operates in a small Caribbean country. The country in which XYZ operates has very strict laws governing the transfer of funds to other countries. Violations of these laws may result in fines or the expropriation of the assets from the company. During the current year, you discover that $50,000 worth of foreign currency was smuggled out of the Caribbean country by one of XYZ's employees and deposited in one of ABC's bank accounts. XYZ's management generated the funds by selling company automobiles, which were fully depreciated on XYZ's books, to company employees. You are concerned about this illegal act committed by XYZ's management and decide to discuss the matter with ABC's management and the company's legal counsel. ABC's management and board of directors seemed to be unconcerned with the matter and expressed the opinion that you were making far too much of a situation involving an immaterial dollar amount. They also believe that it is unnecessary to take any steps to prevent XYZ's management from engaging in illegal activities in the future. ABC's legal counsel indicated that the probability was remote that such an illegal act would ever be discovered, and if discovered, it would probably result in a fine that would not be material to the client's...
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...ACC 655 – Advanced Auditing Term Paper: World Health Alternatives, INC – Fraud Brian O’Rourke, Katharina Ryska 10/14/2013 Introduction Scandals like Enron, Worldcom and Tyco have taught society about CEO’s fudging financial statements in order to make some extra money. With millions of dollars lost for the shareholders, members of the management engaging in fraudulent activity face high penalties. However, these penalties do not stop executives from trying to scam the system. World Health Alternatives, Inc got negative press following a big fraud investigation. The company with its number of wholly owned subsidiaries provides “medical, professional, and administrative staffing services to the healthcare industry in the United States.” By comprising nurse and physician staffing one would expect the company to have integrity. This paper is going to look at the fraud case, auditor’s responsibility, financial statements as well as the charges against the auditor. Furthermore, this paper is trying to see if the SEC allegations were warranted against the auditor. Overview of the Case According to the SEC, World Health Altneratives, Inc (World Health) engaged in fraudulent and improper conduct from at least May 2003 – August 2005. They manipulated accounting entries by understating expenses and liabilities, which made World Health look more financially sound. According to the SEC Website, “every annual and quarterly report that World Health filed with the Commission contained...
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...Inc. & NCR Corporation Verifone Systems, Inc. & NCR Corporation Manhattan College B.S. Accounting and Finance Professor Phillips MBA 609-01 Alison Landy 5/3/12 Table of Contents I. Executive Summary Page 3 II. Description of the Companies Page 4 III. Description of the Industry Page 4-5 IV. Business Risk: Nature of the Industry Page 5 V. Business Risk: Economic Climate Page 5 VI. VeriFone Governance Structure Page 5-7 VII. NCR Governance Structure Page 7-8 VIII. Restatement Page 8-12 IX. Business Risks: The Company Page 12-13 X. Accounting Policies and Disclosure Practices Page 14-16 XI. Financial Statement Analysis Page 16- 18 XII. Conclusion Page 18-19 XIII. Exhibits Page 20 XIV. Reference Page 21 Executive Summary VeriFone Systems, Inc. is a company who was involved in fraudulent financial accounting. After examining their financial statements and other public information prior to the restatement, an analysis was done to determine whether information about the fraud was present. In addition, this paper will have a comparative analysis with a company called NCR Corporation, which is in the same electronic payment industry. A comparative analysis will be done on both financial and nonfinancial information regarding accounting policies and disclosure practices in regards to both companies. There are many business risks associated...
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...(this task is for the course Introduction to Financial Accounting (11th Edition) by Charles T. Horngren (Author), Gary L. Sundem (Author)) Write your answer in the space provided or on a separate sheet of paper. QUESTION 1 Designate how each transaction would be reported on the statement of cash flows using OP for operating activities, IN for investing activities, FI for financing activities, I for an inflow of cash and O for an outflow of cash. If the transaction is included only in a supplemental schedule, denote this as SS. Section Inflow or Outflow 1. Paid cash dividends ________ ________ 2. Purchased 6 months of insurance in advance ________ ________ 3. Sold inventory for cash ________ ________ 4. Purchased equipment signing a two-year note ________ ________ 5. Collected accounts receivable balance from a customer ________ ________ 6. Sold shares of another company's stock held for speculative purposes ________ ________ 7. Reclassified a note from long term to short term ________ ________ 8. Issued bonds at a premium ________ ________ QUESTION 2 The following data pertains to Joss Decorating for the year of 2012: a. Salaries and wages: accrued, $175,000; paid in cash $200,000. b. Depreciation, $50,000. c. Interest expense, all paid in cash, $12,500. d. Other expenses, all paid in cash, $112,000. e. Income taxes accrued, $35,000; income taxes paid in cash, $33,000. f. Bought plant and facilities for $365,000 cash. g. Sales of $1...
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...accounting fraud and auditor legal liability c a S eS inc lu de d in t hiS Se ction 4 89 99 4.1 Enron Corporation and Andersen, LLP Analyzing the Fall of Two Giants . . . . . . . . . . . 4.2 Comptronix Corporation 4.3 Cendant Corporation . . . . . . . . . . . . . . . . . . . . . . Identifying Inherent Risk and Control Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . 111 119 127 137 Assessing the Control Environment and Evaluating Risk of Financial Statement Fraud . . . . . . . . . . . . . . . . . . . . . . 4.4 Waste Management, Inc. 4.5 Xerox Corporation 4.6 Phar-Mor, Inc. Manipulating Accounting Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluating Risk of Financial Statement Fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounting Fraud, Litigation, and Auditor Liability instructor resource Manual — do not coPy or redistribute instructor resource Manual — do not coPy or redistribute enron corporation and andersen, llP analyzing the fall of two giants inS tr uc t ional o b je c t ive S [1] c a s e 4.1 Mark S. Beasley · Frank A. Buckless · Steven M. Glover · Douglas F. Prawitt [2] [3] To help students understand what happened at Enron Corporation and how Andersen’s involvement with Enron led to the accounting firm’s downfall. To enhance students’ appreciation of the importance of understanding an audit client’s core business strategies. To develop students’...
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...Value tree paper Decision analysis assists in the process of structural thinking about decisions and the development of supportive subjective judgments that form a basis for good decisions. There are four main phases involved in the process of decision analysis that is the problem structuring, preference elicitation, recommendation decision and sensitivity analysis. Under the problem structuring phase several issues need to be identified and defined. The first task to be carried out involves context decision definition. For example, this is the stage of identifying a college. After defining the problem, the objectives or objective is defined. For example, to come up with the decision of attending my college, the main objective was to find a college which offers the course that will assist me in gaining access to my career. In addition, the college had to offer that course at an affordable price and be near my place of residence (Howard, & Matheson 2005). The next step involves the generation and identification of decision alternatives. Under this step, I evaluated different colleges which I could attend that offered the same course as the one I needed. After this, a hierarchical model of the objectives is formed. This assists in easily understanding the relationship existing between the objectives more easily. Moreover, a basis for further analysis is also created. Finally, measures are provided so as to identify the extent to which the decision alternatives satisfy...
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...Ethics Essay Nancy Castro Ethics 316 Ruth Embleton March 7, 2012 Ethics Essay Comparing and contrasting ethical theories helps one to understand ones guidance system, which helps or aides one through their decision-making process. “Each theory emphasizes different points such as predicting the outcome and following one's duties to others in order to reach an ethically correct decision.” (2011) each theory has a familiar thread with a goal. In this paper each of the following three ethical theories utilitarianism, Virtue, and Deontological will be described relating to ethics and morality. Concluding with an example with which the relationship between virtue, values, and moral concepts as they relate to utilitarianism. Utilitarianism Utilitarianism ethics emphasize that action should be morally beneficial to a group. This course of ethics is often known as “the greatest good for the greatest number” or simply put, “the greater good” (Boylan, 2009). In other words, the consequence of any ethical action should be beneficial by mass appeal. This is a common underlying theme for ethics in capitalist economies and business as well as in democratic governments (Boylan, 2009). Virtue Theory The virtue theory, also known as virtue ethics, focuses more so on the character of a person rather than the rules and consequences of specific acts. What this essentially means is that the primary focus is whether or not the person acting ethically is a person who upholds...
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...understand the basic concepts that underlie the audit process and how to apply those concepts to various audit assurance services. Through the first part of auditing course, much attention is given to the conceptual, theoretical and practical aspects of auditing financial statements. This course will also examines auditing theory and practice, emphasizing audit standards in Indonesian context, audit risks, materiality, characteristics of evidence, internal controls, auditors’ reports and professional ethics, sampling, and audit programs. Course Objectives After completion of this course, students are expected to be able to: 1. Understand why there is a demand for auditing and assurance services 2. Differentiate between auditing and accounting 3. Understand the relationship among auditing, attestation, and assurance services 4. Know the different types of auditors and their types of services 5. Understand the issues currently affecting the profession 6. Understand generally accepted auditing standard and their relationship to standard auditing 7. Understand the relationship among financial statements, management assertions, and audit objective 8. Demonstrate to develop audit procedures to achieve audit objectives 9. Apply various sampling methods in audit procedures 10. Learn the major phases of the...
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...Surrounding the Professionalism of Accounting | | 3.0 Literature Review | | 4.0 Presentation of the main Idea about the Professionalism of Accounting | | 5.0 Analysis and discussion | | 6.0 Conclusion | | 7.0 Reference | | 1.0 INTRODUCTION 2.0 ISSUES SURROUNDING THE PROFESSIONALISM OF ACCOUNTING Twenty years ago, Briloff (1986) alerted 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...
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...Reporting Practices and Ethics Kara Moore HCS/405 August 1, 2011 Barbara Archer Reporting Practices and Ethics Financial reporting practices and ethics have manifested an ocean of literature. This has mainly come from organization theorists that address accounting practices. These theorists and professionals have given fresh accountability measures. Their ideals give this industry the tools needed to survive, grow and prosper. The way an organization prepares and reports its financial information and handles its daily operations is in essence financial practices, and in the way it accomplishes this reveals their ethical standards to which they adhere to. This paper will discuss the financial practices, ethical standards, and financial management in health care. Financial management in simple terms is a management of finances for an organization. The goal of financial management is to achieve financial objectives, and can be broken down into four phases. The four elements of financial management are: planning, controlling, organizing and directing, and decision making (Baker & Baker, 2009). In the planning phase financials managers need to pinpoint the organizations objectives and the necessary steps to achieve those (Baker & Baker, 2009). In the controlling phase it is all about ensuring that each department is following the guidelines set forth in the planning stage. This can be accomplished by comparing quarterly reports to see if the departmental goals are...
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...Changing ownership and its impact on Firm performance: A detailed pre and post crisis study on Indian firms Several studies are available establishing relationship between firm performance and ownership structure and the results are mixed. Several authors have found significant relationship while others have not found any significant relationships. In Indian context also, there are several studies which propagates to have both kind of results. The way literature is linking the owner ship with performance has always been via addressing the agency (outsiders and insiders) problem, board structure, size, leverage etc. but, literature is sparse to identify these variables as moderating the relationship between ownership and firm performance. The purpose of this study is to establish and study the relationship between ownership and performance in Indian context. Considering following points, I recommend a framework to study the changing ownership and firm performance under the premise that agency costs and information asymmetry acts as moderating variable, which increases/decreases performance when ownership changes. * In India, it is confirmed by several authors that concentrated and complex ownership structure is found which creates problem of heterogeneity and opacity. * India has agency type 2 problems; few studies are available addressing type 2 problem and variables to measure this. * Opacity and complexity creates Information asymmetry and tunneling respectively...
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