...This memo outlines the following questions: What is the methodology used in determining deferred taxes, what is the procedures for reporting accounting changes and error corrections, and what is the rationale behind establishing the subsidiary as a corporation. It will also detail the professional responsibilities of a CPA and what the differences between a review and an audit are. The professional responsibilities of a CPA are to uphold the rules set forth by the State board of Certified Public Accountants, and to conduct ourselves in a manner bound by the rules of the AICPA’s Professional Code of Conduct. They also include: independence, scope of service, confidentiality, practice development, and difference on accounting issues. A CPA at all times should maintain a high level of ethical conduct that goes above and beyond society’s laws. As a CPA we are to keep our professional judgment unbiased and base our opinions on factual information and keep all personal interest separate from the work. CPA’s should keep all client information confidential, and only report information deemed necessary for investors and outside users, as well as determine and discuss with the client and differences in accounting issues that relate to transactions are handled so that they may be resolves in an accurate and timely manner (Schroeder, 2005). The difference between and audit and a review is that an audit provides a basis for an opinion for a company’s financials. A review on the...
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...ABACUS, Vol. 45, No. 3, 2009 doi: 10.1111/j.1467-6281.2009.00295.x MARTIN BLOOM Accounting For Goodwill abac_295 379..389 This article provides a means of resolving one of accounting’s ongoing problems—how to account for goodwill in an era where the unidentifiable intangible asset is often an entity’s largest value component. Despite the general recognition that, in practice, the two classes of goodwill are indistinguishable in terms of their ability to generate streams of revenue, a distinction is traditionally drawn between internally generated and purchased goodwill. The former should not be brought to account because it is impossible to do so within the accepted rules of double entry bookkeeping and historical cost based accounting. On the other hand, there is no difficulty in bringing purchased goodwill to account, but controversy has always existed as to how to treat the amount once recognized. It can confidently be expected that, as anomalies and practical difficulties manifest themselves in practice, the current impairment regime will, in its turn, be abandoned. Key words: Accounting; Double account; Goodwill, internally generated, purchased. Controversy on how to account for goodwill has continued over many decades. It is certainly an example of Sterling’s (1975) lament that because of the way we conceive of issues ‘accountants do not resolve issues, we abandon them’ (quoted in Chambers, 1995). The ideas proposed here are based on redefining the problem. They...
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... |Audit Procedures |Required Disclosures and Reasons | |1 |Tracing |Must adjust the financial statements; affect | | | |your the accounting estimates and are on the | | | |books as of the balance sheet date. | |2 |Analytical Procedures |Nothing; subsequent event occurring after field| | | |work but before issuance of report | |3 |Inquiry |Disclosed as footnotes in the financial | | | |statements; aren’t on the books before the | | | |balance sheet date and have no direct effect on| | | |the financial statements under audit | |4 |Nothing; subsequent...
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...Sources/Plagiarism” announcement for more information. I’m looking for your thoughts more than how well you can cite others’ work! Please number your answers the same way they are numbered in the book so that I can easily identify your answers to each part. Neatness and organization are appreciated! 16-38 For this question, please state either that no report should be issued or what specific type of report should be issued (such as compilation, review, audit, etc.) and what that report will be on, such as on the financial statements, on internal controls, etc. You should also include if any disclaimers should also be issued. a. A compilation report should be issued that describes what the compilation engagement was and an opinion. b. A review report should be issued and it should describe the review and give an opinion. c. No report is needed d. An audit report should be issued describing the audit and an opinion. The internal controls should be the focus of the report. e. An audit report should be issued. Review report should also be issued for the quarterly statements since they are associated with that as well. 16-40 In this example, the audit report given has at least 20 errors. To earn full credit, you need to identify at least 10 of them. You should compare this report to the examples in the book, looking closely at any differences, even if they seem insignificant. I’ll give you an example, and feel free to use this one as a freebie in your own answers. The date at the bottom...
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...Systems (10 questions) ACC400 Auditing, Chapter 1-2 Pre Quiz Name: Date: [1] Gleim #: 1.1.1 -- Source: CPA 1193 A-9 In performing an attestation engagement, a CPA typically A. B. C. D. Supplies litigation support services. Assesses control risk at a low level. Provides management consulting advice. Expresses a conclusion about an assertion. Answer (A) is incorrect. Litigation support services are consulting services. Answer (B) is incorrect. The CPA assesses control risk in an audit but not necessarily in all attest engagements. Furthermore, the assessment may not be at a low level. Answer (C) is incorrect. An attest engagement results in a conclusion about an assertion. Answer (D) is correct. When a CPA in the practice of public accounting performs an attest engagement, the engagement is subject to the Statements on Standards for Attestation Engagements (codified as AT 101 to AT 801). An attest engagement is one in which a practitioner is engaged to issue or does issue an examination, a review, or an agreed-upon procedures report on subject matter, or an assertion about the subject matter, that is the responsibility of another party. [2] Gleim #: 1.1.7 -- Source: CPA, adapted A CPA is required to comply with the provisions of Statements on Standards for Attestation Engagements (SSAE) when engaged to A. Review management’s discussion and analysis (MD&A) prepared pursuant to rules and regulations adopted by the SEC. B. Report on financial statements that the CPA generated...
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...Callahan Date: 3/4/2013 Re: CPA Report Knowing what to write in the CPA report is important because of the information that is being used to make decision with. In the report it includes the questions that have been ask and what the responsibilities is for a CPA. The method that is used for deferred taxes is temporary difference. Temporary difference is the difference between the tax basis of an asset or liability and its reported (carrying or book) amount in the financial statements (Kieso, Wyegrandt, and Warfield, 2007). The reason is that the difference in the timing of the recording of the revenue and expenses. The accounting method that is used for deferred taxes is accrual. Deferred tax is recognized on the financial statements when the taxes are recognize on the asset or liability. The retrospective approach is an approach that the Financial Accounting Standards Board requires for companies when reporting accounting changes (Kieso, Wyegrandt, and Warfield, 2007). In this approach, when one would make the changes of the accounting principle he or she would go back in previous financial statement to make the changes. This would show the consistency in the company financial statements. When reporting an error the same principle applies. When making corrections to an error, one must restate the prior statement in order to correct the error. Afterwards, document what the error was and report it to the company management. When a company becomes acquired during an acquisition...
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...lead executives and managers to “cook the books ” * Pressures from investors ……they want to see that the company/business is growing * Attract new investors ….for the business to grow * Personal reasons …greed and wanting more * Pressure form the big boss * Brand of the company … the business has been known to be a big brang * Slow/decline in the industry 1. What is the boundary between earning management and fraudulent reporting ? Fraudulent reporting is a form of aggressiveWhen a company is in a down turn in business | Earnings management "Earnings management" occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of a company or influence contractual outcomes that depend on reported accounting numbers.[3] Earnings management usually involves the artificial increase (or decrease) of revenues, profits, or earnings per share figures through aggressive accounting tactics. Management wishing to show earnings at a certain level or following a certain pattern seek loopholes in financial reporting standards that allow them to adjust the numbers as far as is practicable to achieve their desired aim or to satisfy projections by financial analysts. These adjustments amount to fraudulent financial reporting when they fall 'outside the bounds of acceptable accounting practice'. Drivers for such behaviour include...
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...Colegio de San Juan de Letran Intramuros, Manila College of Business Administration and Accountancy Accountancy Area First Semester, School Year 2007-2008 |I. |Course Code |: |LAW 1 | |II. |Course Title |: |OBLIGATION AND CONTRACTS | |III. |Course Credit |: |3 units | |IV. |Course Description |: |This course deals with the basic principles of law in relation to contracts and obligations. It involves discussion of the nature, sources, kinds and extinguishments of contracts and | | | | |other miscellaneous topics relevant to the course. Topics include general legal concepts of enforceable rights of obligation: types of laws and national legal systems: nature, purpose,| | | | |scope and key principles of national legislation; sources of obligations;...
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...A View of an Accounting Fraud and Litigation from Inside the Courtroom What the Jury Heard in the PharMor Case 1 In the Phar‐Mor case, several members of top management confessed to, and were convicted of, financial statement fraud. Certain of Phar‐Mor’s creditors and investors subsequently brought suit against Phar‐Mor’s independent auditor, Coopers & Lybrand, alleging the firm was reckless in performing its audits. A jury found the audit firm liable for fraud. While this module can only contain a very small portion of what the jury heard in the five‐month trial, we identify the most important points presented to the jury through a careful review of the trial transcripts and selected interviews with attorneys who were in the courtroom on a daily basis. Unless otherwise noted, all facts and statements are based on actual trial transcripts. Background The $500 million accounting fraud at Phar‐Mor, Inc., led to the bankruptcy of one of the largest private companies in the United States in 1992. As a result of the company’s fraud and subsequent failure, charges were filed against both Phar‐Mor’s management and the company’s auditors. Phar‐Mor’s former management was collectively fined just over $1 million, and two former members of Phar‐Mor management received prison sentences. The company’s former auditors, Coopers & Lybrand LLP (Coopers), faced claims of more than $1 billion, although final settlements were a small fraction of that amount...
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...reporting accounting changes and error corrections, and the rationale for establishing the subsidiary as a corporation. In addition it provides information on the professional responsibilities of Certified Public Accountants (CPA’s). Finally, a distinction is made between a financial audit and a financial review. The Methodology used to Determine Deferred Taxes It is common knowledge that companies report different amounts of income on their income statements and tax returns respectively. This difference is caused by the fact that taxable income is determined on the cash basis of accounting using the internal revenue service (IRS) code; whereas the pre-tax income reported on the income statement is determined on the accrual basis of accounting using generally accepted accounting principle (GAAP). This difference in accounting basis causes the differences in the amounts reported on the income statements and the tax returns. This temporary difference is responsible for deferred tax liability or asset that is recorded on a company’s balance sheet. Therefore, where the amount of taxes payable in the future years is known, it must be accrued and reported on the balance sheet as a deferred tax (Kieso, Weygandt, & Warfield, 2008). Procedures for reporting accounting changes and error corrections When a company changes the accounting principles that it has hitherto used to report a class of transactions to another principle, there is said to be a change in accounting...
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...European Financial Management, Vol. 14, No. 1, 2007, 12–29 doi: 10.1111/j.1468-036X.2007.00415.x Behavioural Finance: A Review and Synthesis Avanidhar Subrahmanyam Anderson Graduate School of Management, University of California at Los Angeles, USA E-mail: subra@anderson.ucla.edu Abstract I provide a synthesis of the Behavioural finance literature over the past two decades. I review the literature in three parts, namely, (i) empirical and theoretical analyses of patterns in the cross-section of average stock returns, (ii) studies on trading activity, and (iii) research in corporate finance. Behavioural finance is an exciting new field because it presents a number of normative implications for both individual investors and CEOs. The papers reviewed here allow us to learn more about these specific implications. Keywords: behavioural finance, market efficiency, cross-section of stock returns JEL classifications: G00, G10, G11, G14, G31, G32, G34 1. Introduction The field of finance, until recently, had the following central paradigms: (i) portfolio allocation based on expected return and risk (ii) risk-based asset pricing models such as the CAPM and other similar frameworks, (iii) the pricing of contingent claims, and (iv) the Miller-Modigliani theorem and its augmentation by the theory of agency. These economic ideas were all derived from investor rationality. While these approaches revolutionised the study of finance and brought rigour into the field, many lacunae...
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...2. CPA-05466 A retailing entity uses the Internet to execute and record its purchase transactions. The entity's auditor recognizes that the documentation of details of transactions will be retained for only a short period of time. To compensate for this limitation, the auditor most likely would: a. b. c. d. Compare a sample of paid vendors' invoices to the receiving records at year-end. Plan for a large measure of tolerable misstatement in substantive tests. Perform tests several times during the year, rather than only at year-end. Increase the sample of transactions to be selected for cutoff tests. ANSWER: Choice "c" is correct. When an entity transmits, processes, maintains, or accesses significant information electronically, some accounting data and source documents may be available only in electronic form, or only at a certain point in time. The auditor would generally perform tests of controls several times during...
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...deferred taxes. The deferred taxes reported are a temporary difference. The deferred taxes were calculated based on what needed to be reported versus what has been posted to the corporations’ books. The “temporary difference is the difference between the tax basis of an asset or liability and its reported (carrying or book) amount in the financial statements, which will result in taxable amounts or deductible amounts in future years” (Kieso, el. 2007, Ch. 19). The corporation has taken the balance sheet approach to account for this timing issue and SFAS 109 guidelines have been followed. • The procedures for reporting accounting changes and error corrections. According to Kieso, Weygandt, and Warfield (2007, Ch. 22), and the Financial Accounting Standards Board [FASB], reporting accounting changes should be done using the retrospective approach. The retrospective approach reflects the changes done in previous financial statements so that they are more comparable. To report these changes first the corporation adjusts each prior period financial statements and then the corporation “adjusts the carrying amounts of assets and liabilities as of the beginning of the first year presented” (Kieso, el. 2007, Ch. 22). Reporting an error correction is similar to reporting an accounting change. First the corporation makes the necessary adjustments to the prior period financial statements and then the corporation discloses the error as a restatement. • The rationale behind...
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...VOLUME NO. 4 (2014), ISSUE N O. 10 (OCTOBER) ISSN 2231-5756 A Monthly Double-Blind Peer Reviewed (Refereed/Juried) Open Access International e-Journal - Included in the International Serial Directories Indexed & Listed at: Ulrich's Periodicals Directory ©, ProQuest, U.S.A., EBSCO Publishing, U.S.A., Cabell’s Directories of Publishing Opportunities, U.S.A., Open J-Gage, India [link of the same is duly available at Inflibnet of University Grants Commission (U.G.C.)], Index Copernicus Publishers Panel, Poland with IC Value of 5.09 & number of libraries all around the world. Circulated all over the world & Google has verified that scholars of more than 3480 Cities in 174 countries/territories are visiting our journal on regular basis. Ground Floor, Building No. 1041-C-1, Devi Bhawan Bazar, JAGADHRI – 135 003, Yamunanagar, Haryana, INDIA http://ijrcm.org.in/ VOLUME NO. 4 (2014), ISSUE N O. 10 (OCTOBER) ISSN 2231-5756 CONTENTS Sr. TITLE & NAME OF THE AUTHOR (S) No. 1. BRAND PRIDE AS A CONSTRUCT CONTRIBUTING TO RETAINING MISSION CRITICAL TALENT OF THE 2. 3. 4. ORGANIZATION: A COMPARATIVE STUDY OF SELECTED ORGANIZATIONS DR. GEETA BANSAL & DR. PARUL PANDEY CONSUMER ATTITUDE AND PERCEPTION TOWARD BRANDS OF EDIBLE OIL: AN EMPIRICAL STUDY AMITA SHARMA & DR. D. S. CHAUBEY CAPITAL STRUCTURE AND ITS IMPACT ON PROFITABILITY OF AUTOMOTIVE INDUSTRY: THE INDIAN CASE SANJAY HIRAN & DR. MAHENDRA SOJATIA MERGERS AND ACQUISITIONS IN INDIAN BANKING SECTOR: AN IMPACT ANALYSIS...
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...Corporation, a wholly owned subsidiary of ABC Company. Specifically this memo addressed the methodology used to determine deferred taxes, the procedure for reporting accounting changes and error corrections, and the rationale behind establishing XYZ Corporation as a subsidiary. Also included in this memo, as requested, is a discussion of the responsibilities of a CPA, and the differences between a financial review report and a financial audit report. Methodology used to Determine Deferred Taxes Deferred taxes can be one of two different types of deferred tax entries, permanent or temporary. Permanent deferred tax liabilities are income generating events that do not incur tax liabilities, and thus a permanent adjustment to the financial reports is made to adjust for the discrepancy between income for tax purposes, and income for reporting purposes. A temporary deferred tax liability is a liability where taxable income is different from reportable income, but at some future point, the taxable income will reconcile to the reportable income (Kieso, Weygandt, & Warfield, 2007). Temporary deferred tax liabilities can result in either an excessive or insufficient amount of tax withheld in the current period, which will be reconciled at a later period. An example is the depreciation of a capital asset. If the book depreciation of a capital asset is at a greater rate than the tax rate depreciation of the same asset, then a discrepancy between the financial income statement...
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