...Going Concern issues in financial reporting: a guide for companies and directors Published in 2009 by: Australian Institute of Company Directors (AICD) Level 2 255 George Street Sydney NSW 2000 Telephone: (+61 2) 8248 6600 Facsimile: (+61 2) 8248 6633 www.companydirectors.com.au publications@companydirectors.com.au Auditing and Assurance Standards Board (AUASB) Level 7 600 Bourke Street Melbourne VIC 3000 Telephone: (+61 3) 8080 7400 Facsimile: (+61 3) 8080 7450 enquiries@auasb.gov.au www.auasb.gov.au © Australian Institute of Company Directors (AICD) © Auditing and Assurance Standards Board (AUASB) © Financial Reporting Council (UK) 2009. Portions of this publication have been adapted and reproduced from an Auditing Practices Board Bulletin: Going Concern Issues During the Current Economic Conditions (December 2008) with the kind permission of the Financial Reporting Council (UK). All rights reserved. For further information please visit www.frc.org.uk or telephone +44 (0)20 7492 2300. © Portions of this publication have been adapted and reproduced from a KPMG Flash Report: How Concerned Should Directors be with Going Concern? (February 2009) with the kind permission of KPMG. All rights reserved. Typeset by Endnote design Printed by Ligare Pty Ltd National Library of Australia Cataloguing-in-Publication entry Going Concern issues in financial reporting: a guide for companies and directors/AICD, AUASB ISBN 9781876604158 (pbk.). 9781876604172...
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...Act 101(Going Concern) 'Definition of the 'going concern' concept The 'going concern' concept directs accountants to prepare financial statements on the assumption that the business is not about to go broke or be liquidated (i.e. where the business closes and sells all the assets for whatever price they can get). So, unless there is significant evidence to the contrary, accountants will base their valuations and their reporting of financial data on the assumption that the business will remain in existence for an indefinite period. An indefinite period means the foreseeable future or long enough for the business to meet its objectives and to fulfill its commitments. It is important to note that the 'going concern' concept does not imply or guarantee that the business is profitable and will remain so for the foreseeable future. So, the 'going concern' concept assumes that the business will remain in existence long enough for all the assets of the business to be fully utilized. Utilized assets means obtaining the complete benefit from their earning potential. (i.e. if you recently purchased equipment costing $5,000 that had 5 years of productive/useful life, then under the going concern assumption, the accountant would only write off one year's value $1,000 (1/5th) this year, leaving $4,000 to be treated as a fixed asset with future economic value for the business). The 'going concern' concept supports the assumption that when a business buys assets like land, equipment...
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...recorded directly in equity, the expense or income amount is to be included in profit or loss. Specifically, paragraph 88 of AASB 101 states: An entity shall recognise all items of income and expense in a period in profit or loss unless an Australian Accounting Standard requires or permits otherwise. As an example of one class of items that does not go to profit or loss we can consider the situation where an error from a prior period is discovered (perhaps the assets recorded last year were valued in excess of their recoverable value). In such a case the error is to be corrected retrospectively, as required by AASB 108 Accounting Policies, Changes in Accounting Estimates, and Errors. This would require a reduction in assets and a reduction in retained earnings to recognise the asset write-down expense. Although this is an expense that is recognised, it is a case of an expense being recognised directly in equity (retained earnings is an equity account). A number of other accounting standards also require certain income and expense items to be recorded directly in particular equity accounts rather than including them in a period’s profit or loss. These items form part of what is now referred to as ‘other comprehensive income for the year’—which when added to ‘profit or loss’ gives ‘total comprehensive income’ for the period. Paragraph 7 of AASB 101 defines ‘other comprehensive income’ as follows: Other comprehensive income comprises items of income and expense (including reclassification...
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...with respect to the client under audit. B. 3) involves the objective examination of and reporting on management prepared statements. C. 1) maintains public confidence in the profession. 4-19 A. 1) a fee based on whether the CPA’s report on the client’s financial statements results in the approval of a bank loan B. 3) Disclosing confidential information to another accountant interested in purchasing the CPA’s practice. C. 3) prohibited under the AICPA rules of conduct. 4-20 A) Yes B) No C) No D) No because recommending tax shelters is not prohibited as long as the service does not meet the characteristics of an abuse tax avoidance strategy, but has the potential to impair independence. E) Yes F) No 4-21 A) Rule 101 - Independence. No violation. Jose Martinez is not a partner nor is he assigned to the engagement team for the...
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...thoughts written down in order to feel a connection with the antagonist character, O’Brien. Winston ponders, “It was absurd, since the writing was not more dangerous than the initial act of opening the diary; but for a moment he was tempted to tear out the spoiled pages and abandon the enterprise altogether,” (18). Even from the beginning, Winston was rebellious. He purchased the diary in order to keep his thoughts written down. Although there were no laws in Oceania about keeping a diary, there are acts that are punishable, such as keeping your thoughts written down. Winston is a wise thinker. He is capable of even the most complex thoughts. Throughout the novel, he questions everything the party says, which also happens to be dangerous. During his torture by O’Brien Winston whimpers, “But the word itself is only a speck of dust. And man is tiny--Helpless! How long has he been in existence? For millions of years the earth was uninhabited,” (265). During his torture, O’Brien is attempting to fill Winston’s head with what the Party wants him to think, however, Winston is headstrong, and knows better than to eat up all the information fed to him. Smith is not a blind follower. He plans on taking the party down and restoring the past. Winston is not capable of confining his thoughts; Winston’s thoughts are going to be the death of him. The purpose for Orwell’s character, Winston, is to defeat Big Brother and overthrow the Party. Winston wants to have the ability to do whatever he pleases...
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...Summary Nick O’Brian is a recent college graduate. He began working in the accounting department at his aunt’s software company, O’Brian Software. Nick is going over the financial statements when he recognizes some questionable revenue recognition issues. Nick proceeds to address his concerns with the chief financial officer of the company, Lee Marchetti. Lee explains to Nick how revenue recognition is broken down and that a lot of information and judgment is involved. It is also pointed out that since the company went public three years ago they have consistently received ‘clean’ opinions from external auditors. Nick admits that Marchetti strikes him as a honest man with years of experience. Out of concern for his aunt’s company he approached his aunt, who is not known for her accounting expertise, but is the CEO of O’Brian Software. After explaining his concerns she asked Nick whether or not they should present this information to the audit committee. Issues/Questions The initial question is whether or not the audit committee should be made aware of Nick’s revenue recognition concerns. As President and CEO of Softrax Corporation, Robert O’Connor, points out, this is a serious claim. It is imperative that Nick does his research before making such a claim. The underlying issue in this case is if O’Brian Software is creating ‘cookie jar’ reserves by understating profits in periods of prosperity and then creating false reserves in times the company needs a boost. The...
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...| Smackey Dog Foods, Inc. | Pre Audit Analysis | | Nikki Leach | 4/17/2012 | | Smackey Dog Food is a privately held company started by three sisters in Chicago, IL. Smackey manufactures a natural dog food and distributes it to pet stores, small grocery stores, kennels and veterinarians. The company has also started another line of high end single serve pre-packaged dog food they only sell through their website. Smackey is looking to expand and therefore needs to take out another loan; they currently have a loan that is secured by manufacturing equipment purchased with the money. The bank is asking for an audit of financial statements to determine if they will approve a second loan. The company wants to use receivables to secure the loan. We have been hired to conduct an audit of the financial statements. The SEC has no influence over the audit since Smackey is a private company; however, since Keller CPA is auditing the financial statements we will be following GAAP. Although the SEC has no influence we will be following any guidelines put forth by the SEC in regards to private companies to determine the financials are presented fairly. In the future if Smackey should decide to go public there are numerous steps that will need to be followed. We have assigned Peter as the audit manager and he will be assisted by Ben and Maureen. They will assess the client and plan the audit. The initial planning involves four things to be done...
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...Accounting firm Barnes and Fischer Medium sized national CPA firm Partnership formed in 1954, with 6000 professionals on the payroll. Firm provides auditing and tax services, also builds information systems for the consulting side of business for non-audit clients, or clients who have not publicly traded. first assignment as an audit mangager is to assist an audit partner on a client acceptance decision. prospective client is OCEAN MANUFACTERING medium sized manufacturer of small home appliances. At a local chamber of commerce meeting, the president met the company’s president. The company decided to end its relationship with its current auditor because they want to build a relationship with a more nationally established CPA firm because the company want to make an initial public offering IPO of its common stock within the next few years. Ocean’s annual financial statements have been audited each of the past 12 years to comply with the debt covenants and to receive interest rate on the company’s existing line of credit. The December 31 fiscal year has passed so NOW it is the time for the company to contract with a new auditor to get the audit under way. Our partner Jane Hunter is intrigued with the idea of having a client in the home appliance industry. Especially oceans, because it has a favourable market position and growth potential!! Our company never had a client in this industry (small home appliances) before. Most of our audit clients are in the...
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...change but they refuse. You resign. They appoint another auditor. Can you review the successor? * Can review if you ask permission from client * If without the consent from the client, you can’t review ( breach of confidentiality) * You’re auditor for A. B is the supplier for A. In the same time, B prepare financial statement, found that A haven’t pay the money, B ask you to investigate why A haven’t pay? Can you as the auditor for A reveal the information? * You can’t reveal * Issue of confidentiality; issue of interest pg 643 * You can’t help B because you’re the auditor for A. * Concept True & Fair pg 21 * Is there a meaning of True & Fair? * Yes. It is a legal term as mentioned in Companies Act 1965. There is no proper definition on true and fair. * It is not correct or error ( guarantee or giving absolute assurance) * It is only give reasonable assurance. This is an abstract (subjective) concept. * Why auditors give True & Fair? * What is True & Fair? * “True” – where facts & information that can be verified with high degree of certainty. * “Fair”- It is very subjective. Where facts or information that cannot be verified with high degree of certainty. Eg provision for doubtful debts (5%) Chapter 2 Legal...
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... Should I order a shake or lemonade? Should I wash the car today or wait until tomorrow? These simple decisions often happen without serious thought. Why? Because these decision are not life changing ones. But what happens when the decision is not so easy to make, when it’s life changing. Sometimes a person’s conscious greatly affects one’s decision making, especially when the topic of whistle blowing arises. In this paper, I will discuss and analyze whistle-blowing, where it occurs, the effects of whistle-blowing, whether whistle-blowing is an act of betrayal or public service, the consequences of whistle-blowing, and finally I close my paper with a conclusion. This paper also aims to provide a balanced approach to this topic. Understood correctly whistle-blowing is defined as an informant who exposes wrongdoing within an organization. Whistle-blowing is not about informing in the negative but more so, raises concern about malpractice within an organization. More so, it can also be defined as the release of information by a member (or former member) of an organization where there is evidence of illegal or immoral conduct in the organization, or conduct in the organization that is not in the public interest . The decision and bravery of being prepared to blow the whistle is directly related to the cultural resistance in many organizations to be transparent and accountability. It is hard to imagine the agony of discovering wrongdoing in your profession. The choice of...
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...1. A. The standard unqualified report is comprised of the report title, audit report address, introductory paragraph, scope paragraph, opinion paragraph, name of CPA firm, and the last day of field work. Auditing standards requires the report to have a title, as well as having the word independent in the title. The requirement to have the word independent within the title explains to users that the auditor is independent of the company. In terms of the audit report address, the report is generally addressed to the company, its stockholders, or the board of directors to indicate that the auditor is independent of the company. The first main section in the unqualified report is known as the introductory paragraph. This paragraph explains that the CPA firm has performed an audit, and it intends to distinguish the report from a review report. Additionally, the introductory paragraph lists the financial statements that were audited, including the balance sheet dates and the accounting periods for the income statement, as well as the statement of cash flows. The wording of the financial statements in the report should be identical to those used by management on the financial statements. Finally, this paragraph states that management is responsible for the statements, and the auditor is responsible to express an opinion on the statements based on an audit. The second core part of the report is the scope paragraph and it is an accurate statement about what the auditor did in the audit...
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...The problem is that there needs to be a system put in place that will work for the criminal justice system the potential criminal. We need to be able to identify what type of person we are dealing with and do what is best per that situation, not just assume everybody is guilty and possibly ruin their life. SUFFERING 3 The mentally ill often times make mistakes or are accused of crimes that usually send them to jail. The problem (for me) is knowing when it is okay to justify these criminal like acts or decided whether the person should be put into a situation where they can get help or go to jail. Is it really safe, necessary, or proper precaution to incarcerate a mentally ill person? Safety should be the main concern for a mentally ill person that is institutionalized. Putting them in big populations of people could be dangerous. Their reactions to situations are usually different than most normal thinking people. With that being said, they could actually end up spending way more time incarcerated than they intended to due to penalties from getting into trouble. Most...
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...Ursula Wyatt Professor: Dr. Anthony DiMaggio SOC 101 February 1, 2016 Assignment 1: Consumerism & the Formation of Consciousness under Capitalism The documentary’s main concern in my opinion is how to control the masses for the greater purpose of consumerism. Also the documentary kept stating that the purpose was also to control the animalistic behavior that every human being has inside them somewhere, waiting to be unleashed if not controlled properly. In regard to how human beliefs and values are formed in modern society, everything that I watched was true. Scary, but true. Public beliefs are formed through general belief of the crowd and/or people around you. It doesn’t matter what you think, it matters what everyone else thinks. It is eerily interesting to see how one man can bring thousands of people to act a certain way, to believe certain things, to make people buy things. Modern society is really just base off of the thoughts, values and beliefs of whoever is running the show at the time. Whatever the politicians and businesses need you to be thinking and feeling at any point and time is what is going to be portrayed everywhere around you. It is sad if you think about it. Being controlled by society instead of being a part of it to help make a difference. It made me want to never turn my television on again. The relevance of the subconscious/conscious mind as it relates to mass consumerism is quite simple. He who controls the masses control the market...
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...Elizabeth Scott Bits and Bytes Informatics 101 September 11, 2015 The article I have chosen to write about concerns the Internet cyber attacks that took place a few years back in South Korea. The cyber attack plagued over 32,000 computers and servers with a virus or “computer bug” (Bits and Bytes Powerpoint, Onesti & Richart). The virus crashed multiple computers and enabled them all to function extremely slow, or not function at all. This attack was targeted at banks and broadcasting computers (Pearson). Sources say that these attacks were traced to an IP address in China. However, this does not mean that China was at fault. The article states that North Korea is under suspicion for these cyber attacks. In lecture, we spoke a lot about the Internet and also something called a “computer bug” (Bits and Bytes Powerpoint, Onesti & Richart). Before lecture I did not know the origin behind the term computer bug, however, I learned that it was a literal bug found in the machine that was blocking one of the tubes in the computer, disabling it from doing its job. Later, the term eventually came to mean something that inhibited the computer from working properly. The hackers that caused disturbance in South Korea hacked the computers of many banks and broadcasting companies with a bug. In lecture we also discussed the importance and meaning of information. Information is data, and data is created by the users of the Internet (Onesti & Richart). During this hacking...
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...Dr. Paul Davis | Political Science 101 | July 18, 2015 Dr. Paul Davis | Political Science 101 | July 18, 2015 Drinking Age Should Be Reduced to 18 in the United States by laurie rose Drinking Age Should Be Reduced to 18 in the United States by laurie rose The law states that you can start drinking legally at 21 in the United States. Some people think that a federal law should be passed that reduces the drinking age to 18 in all states. I agree with this side of the argument. It is not just young people who are for lowering the drinking age but some legislators as well. Representative Bob Lynn who is in the state legislature of Alaska also argues that the drinking age should be lowered for 18 year olds in the military. “Why do we consider 18-year-olds old enough to join the military, to fight and die for our country, but not to have a drink with their friends before they ship out or while they are home or on leave?” (Minton) Phyllis Kahn who is a state representative of Minnesota has fought for years to lower the drinking age in her home state. She proposed two bills this year on this topic in her state. One bill would lower the drinking age in bars and restaurants to 18. The other bill would allow underage teenagers who are accompanied by a parent or a spouse who is of legal age. She feels that if teenagers want to drink, they need to do it socially instead of getting alcohol from an older friend or relative and then binge drink. It would also eliminate the need for...
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