...Just for Feet, Inc. Abstract Just for Feet, Inc. (JFF), its executive vice president; Don-Allen Ruttenberg, and the company’s auditing firm; Deloitte & Touche, LLP, and its associates; Steven H. Barry, CPA and Karen T. Baker, CPA, were all found guilty, on some level, in the fraud of Just for Feet, Inc. Ruttenberg purposely gave the company’s accounting department false financial information causing the accountants to record over $5 million in fictitious accounts receivable. This, in turn, caused the income statement to be overstated by $5 million (Knapp, M., 2009). The company’s auditors Deloitte, Barry, and Baker included the false information in JFF’s 1998 financial reports. These false reports were prepared for public filing with the Securities and Exchange Commission, which resulted in shareholders of JFF to be defrauded. Ruttenberg, Deloitte, Barry, and Baker were brought to justice, and the company’s shareholders settled for $32.4 million in a class-action lawsuit (Knapp, M., 2009). Just for Feet Based in Birmingham, Alabama, Just for Feet (JFF) was established in 1977 and became a publicly traded company in 1994. Despite a period of slow growth in the retail industry, JFF expanded rapidly from 1994 to 1999. By 1998, the company’s exceptional revenue growth deemed it as the top-selling retailer of athletic shoes and apparel in the United States. In JFF’s 1998 financial statements, the company reported $689.4 million in assets, $774.9 million...
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...SOLUTIONS TO RESEARCH PROBLEMS Research Problem 1 Hoffman and Smith CPAs 5191 Natorp Boulevard Mason, OH 45040 March 6, 2012 Mr. Donald Dewey 4321 Mt. Vernon Road Dover, DE 19901 Dear Don: At the recent Chamber of Commerce meeting, you asked me about the tax advantages of having Van, your son, claim Debra, your daughter, as a qualifying child. If Van can treat Debra as his qualifying child, he qualifies for a dependency exemption, the child tax credit, and the earned income tax credit. On the other hand if you claim Debra, the only benefit available is a dependency exemption—your income is too high to permit the use of either the child tax credit or earned income tax credit. A dependency exemption yields a greater tax benefit to you than to Van, but the tax saving is by far outweighed by the unavailability of the two credits. Consequently, the family would save taxes if Van claims Debra as his qualifying child. In such a case, you would have to forgo the dependency exemption for Debra. Until 2009, the procedure suggested in the preceding paragraph was permissible. However, in the Emergency Economic Stabilization Act of 2008, Congress changed the rules. Under current law, another eligible taxpayer may claim a person as a qualified child only if he or she has an adjusted gross income (AGI) higher than the highest AGI of any of the person’s parents. Clearly, the new condition eliminates Van because his AGI ($16,000) is not higher than the AGI...
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...Memorandum-to-the-File Date: May 25, 2011 From: Brenda Hall Re: How many dependency exemptions John and Janet Baker can claim for the year? Facts John and Janet Baker are husband and wife and maintain a household of 7, including Janet and John. Calvin and Florence Carter are Janet’s parents, who are retired. During the year, they received $19,000 in nontaxable funds (disability income, interest on municipal bonds and Social Security benefits) from which $8,000 was equally spent between them on clothing, transportation, and recreation. The remaining $11,000 was invested in tax-exempt securities. Janet Baker paid $1,000 for her mother’s dental work and $1,200 premium on her father’s own life insurance policy. Janet’s father, Calvin, incurred medical expenses that he paid for himself. Darin is the Bakers’ 18-year-old son who is not a student. Darin earned $14,000 from his pool-cleaning business. The cash earned is placed in a savings account. Andrea is the Bakers’ 19-year-old daughter who does not work or go to school. During the year, Andrea purchased a Camaro for $21,000 with her own funds. Morgan is the Bakers’ 23-year-old daughter who obtained a student loan of $20,000 and used the full amount to pay her college tuition at a local university. The Bakers’ fair rental value of their residence, including utilities, is $14,000, while their total food expense for the household is $10,500. Issues Do Calvin and Florence qualify for a dependency exemption as qualifying...
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...Accounting Insights Accounting for leases: Change is coming. By Matthew Rodgers and Peter McElwain, Baker Tilly September 21, 2010 Leasing of equipment, real estate, and other assets has been and continues to be a significant source of financing for businesses in all industries. As a result, the financial reporting rules for the treatment of lease transactions can be significant to the financial statements and the business operations of lessees and lessors alike. The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have undertaken a joint project on leases to improve the financial reporting for lease transactions. The financial reporting standards in the United States currently provide that all lease transactions will be accounted for in one of two ways depending on facts, circumstances, and to some degree the judgment of the users. The two alternative treatments, referred to as operating leases and capital leases, have dramatically different consequences on the financial statements of both lessees and lessors. There are a number of perceived weaknesses in these rules and the manner in which they are applied, which many believe result in inconsistent and incomplete reporting and presentation of an entity’s leasing activities. In response, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have undertaken a joint project on leases to improve the financial...
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...goods to supply all person who might see the ad with the item in question. Since the number of coats available are specified at 3, overacceptance is not at issue. A unilateral contract was formed when Marsha was first in line and offered payment for the coat. This case problem was developed from the classic case of Lefkowitz v. Great Minneapolis Surplus Store, 86 N.W.2d 689 (Minn. 1957). 2. The parties clearly intended to contract and a contract can be evidenced by papers grouped together; it need not all be on one form. “ACCEPTANCE ON REVERSE SIDE” does not convey a mandatory condition, but rather only a convenient method for acceptance. The letter accomplishes the same purpose. [Overman v. Brown, 372 N.W.2d 102 (Neb.)] 3. No. A revocation is not effective until it is communicated to the offeree. In the case of a mailed revocation, this requires actual receipt by the offeree of the revoking letter. Unlike a letter of acceptance, the letter of revocations is not effective when mailed. 4. Judgment for Baker. When Nelson made changes to Baker’s offer, his action had the effect of rejecting the offer and proposing a counteroffer to Baker, even though Nelson purported to be accepting the original offer. Baker was not willing to buy under the terms stated by Nelson. This decision involves the social forces of freedom of personal action and enforcement of intent. It also involves the ethical value of fairness. You may wish to discuss...
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...Accounting Principles Board, and Financial Accounting Standards Board), public accounting firms were still perceived by many on Capitol Hill as biased in favor of their clients, incapable of or unwilling to police themselves, and at times participants in cover-ups of client affairs. Senator Metcalf even went so far as to suggest nationalizing the industry in light of these activities. Just prior to the Metcalf report, Daniel Potter began working as a staff accountant for Baker Greenleaf, one of the Big Eight accounting firms. In preparation for his CPA examination, Dan had rigorously studied the code of ethics of the American Institute of Certified Public Accountants (AICPA) and had thoroughly familiarized himself with his profession's guidelines for morality. He was aware of ethical situations which might pose practical problems, such as maintaining independence from the client or bearing the responsibility for reporting a client's unlawful or unreasonably misleading activities and he knew the channels through which a CPA was expected to resolve unethical business policies. Dan had taken the guidelines very seriously; they were not only an integral part of the auditing exam, they also expressed to him the fundamental dignity every independent auditor was obligated to maintain and calling of the profession-namely, to help sustain the system of checks and balances on which capitalism has been based. Daniel Potter firmly believed that every independent auditor was obligated to maintain...
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...Becker CPA Review, PassMaster Questions Lecture: Financial 6 CPA PassMaster Questions–Financial 6 Export Date: 10/30/08 1 © 2009 DeVry/Becker Educational Development Corp. All rights reserved. Becker CPA Review, PassMaster Questions Lecture: Financial 6 Pension Plans CPA-00679 Type1 M/C A-D Corr Ans: D PM#1 F 6-01 1. CPA-00679 FARE R02 #8 a. b. c. d. Page 19 Which of the following disclosures is not required of companies with a defined-benefit pension plan? A description of the plan. The amount of pension expense by component. The weighted average discount rate. The estimates of future contributions. CPA-00679 Explanation Choice "d" is correct. Although pension accounting has extensive disclosures, projections of future contributions into a pension plan are not required. "a", "b", and "c" are required disclosures. CPA-00681 Type1 M/C A-D Corr Ans: C PM#2 F 6-01 2. CPA-00681 FARE R99 #13 Page 9 Jan Corp. amended its defined benefit pension plan, granting a total credit of $100,000 to four employees for services rendered prior to the plan's adoption. The employees, A, B, C, and D, are expected to retire from the company as follows: "A" will retire after three years. "B" and "C" will retire after five years. "D" will retire after seven years. What is the amount of prior service cost amortization in the first year? a. b. c. d. $0 $5,000 $20,000 $25,000 CPA-00681 Explanation Choice "c" is correct. Amortization of unrecognized prior...
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...using an ethical framework, the AICPA code of rules and interpretation on independence and it’s importance and the requirements of other rules under the AICPA. We found that in some cases the rules of conduct is applied accurately and in other situations violation of code of conduct, rules of conduct is existed. Ethics in professional accountancy are of utmost importance. Now as the business and financial world is adopting international accounting and auditing standards, it is becoming all the more necessary to adhere to certain Code of Ethics prescribed by international and national accountancy bodies. Accountants practicing in all segments of accounting need to understand both the relevant ethical standards of accounting and the mechanisms for enforcing these ethical standards. Further, accountants need to have an understanding of how to apply these standards in practical situations. In 1988, the AICPA restructured the profession's Code of Conduct. The changes resulted in a code with a more positive orientation. 1.0 Introduction The most well-known attest engagement is the CPA's auditing of financial statements prepared by a company's management. In this situation the CPA adds credibility to the financial statements by issuing an independent auditor's report stating that the CPA believes the financial statements have...
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...University of North Texas ACCT 4400 (3 hours): Auditing - Professional Responsibilities Summer II 2012 Section 001 - Section Time Place 001 MTWR 10:00am -11:50am BLB 255 Instructor: Jay Baker, MSFS, MBA,CPA,CFP Email: Best way to contact me – EMAIL ME ONLY at Keith.Baker@unt.edu Phone: 940.369.8156 Office and Office Hours: BLB 387C - Tue. & Wed. 12:00 p.m. – 1:00 p.m. Required Materials: 1. Auditing & Assurance Services: A Systematic Approach. Messier, Glover, and Prawitt. 8th ed. 2012. Prerequisites: ACCT 3120 and ACCT 4100; BLAW 3430; must have a 2.5 GPA in all ACCT 3000 and ACCT 4000 courses taken at UNT or their equivalent taken at other colleges and universities to take this course. ACCT 4400 may not be taken more than twice whether at UNT or at another college or university. Class Website: A class website will be established and maintained throughout the course on Blackboard (go to http://www.unt.edu/ and click the link at the top for “Blackboard”). Course materials such as notes will be available on Blackboard. You are responsible for anything that I note through Blackboard emails and announcements. Course Description: Introduction to auditing and the professional responsibilities of a career in any specialty of the accounting profession. Topics include the legal and ethical responsibilities of accountants; professional auditing standards; the audit risk model; the acquisition, evaluation and documentation of audit evidence; reports on the results of the audit engagement...
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...into the business. Fial formed a new business called Audit Consultants of Colorado, Inc. He then terminated the original partnership’s contracts with many clients and put them under contract with his new firm. Fial also terminated the partnership’s contracts with the independent-contractor auditors and signed many of these auditors with his new firm. The partnership terminated about 11 months after Fial wrote the letter to Steeby. Steeby brought an action against Fial, alleging breach of fiduciary duty and seeking a final accounting. Who wins? Steeby v. Fial, 765 P.2d 1081, Web 1988 Colo.App. Lexis 409 (Court of Appeals of Colorado) PARTIES In the Steeby vs. Fial case Roger Steeby is the plaintiff and Charles Fial is the defendant. Steeby and Fial formed a partnership at will to perform auditing services. CASE SUMMARY (FACTS) Pursuant to the agreement, equity, income, and profits of the partnership were shared equally. In the infancy stage of the partnership they conducted audit services themselves. As business success started to trend upwards they decided to employ independent contractors (auditors) to assist in performing audit service. Eventually the auditors were carrying out...
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...Assignment on LR Process (10 Marks) 1. Categorizing your papers This should be a list of papers that have shaped your thinking so far. You may wish to highlight those that are ‘core’ and those that are more ‘peripheral’ [recognising that what is deemed core and periphery may change over time]. State a list of 15 papers related to your work. |Core papers |Peripheral papers | | | | | | | | | | | | | | | | On what criteria have you decided that a paper is core/periphery. Core papers are: • Texts that acknowledge and discuss the problem statements of your research and discuss the reality of the related situation. • Texts that reflect on the link between areas of focus in research • Texts that discuss...
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...Ryan Streetman July, 26, 2011 WORLDCOM’S FALL AND THE CONTROVERSY OF SARBANES OXLEY WorldCom provided telecommunication services of voice and internet. They began as a long distance reseller in 1984. The company was headed by Bernard Ebbers who became the CEO in 1985. The company didn’t go public until the middle of 1989. Through the years, WorldCom became more than just a telecommunications company. They were also information technology out-breakers. They were able to become an internet powerhouse and challenge their market “via mostly fiber-optic, business-oriented local networks” (Thyfault). WorldCom eventually became the largest telecommunications company in the late nineties due to the merger of many other companies. Their biggest merger was WorldCom and MCI in 1997. With this merger they became the second-largest long-distance communication behind AT&T. WorldCom didn’t stop there with IT breakthroughs; in lieu of the MCI merger they launched one of the first Virtual `Private Networks that are provided to companies. VPN’s are still used today in the IT industry. They even helped companies outsource the design and management of their web hosting operations (MCI). WorldCom was one of the most powerful companies and so big that when Sprint Telecommunications Company agreed to merge with MCI WorldCom, it would have been the largest merger in history. This would have created a giant monopoly in the economy. That’s why the government stepped in and brought about a violation...
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...Rogue Trader Name(s) ___________________________ Accounting information systems ____________________________ I understand that this exam is to be completed by myself or in a team of two and that any assistance received from other students or any unauthorized source is cheating and subject to the appropriate disciplinary action as deemed by the Office of the Dean of Albers School of Business and Economics. I (we) am aware of the exam policies / rules provided and agree to abide by them. _____________________________________ Student's Signature – Date _____________________________________ Student's Signature – Date Important: Make sure you read all the way through this assignment. Information regarding grading is included in the assignment instructions. “ROGUE TRADER” You are a new graduate, and you just got the job of a lifetime at the New York office of one of the big accounting firms. Yesterday, the managing partner, Connie Rise, set up an appointment for you to meet with her today. “Good morning,” she says, as you wonder what you have done to be summoned to her office at 8 a.m. You are still reeling from relocating to New York and working in this fast-paced environment. Here you are, plucked from a small city located among wine farms and rolling hills on the central coast of California and plunged right into the thick of things in New York City. But you love your new environment. You earn a great salary, pay exorbitant rent for...
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...CHAPTER 9 Audit Sampling Review Questions 9-1 Nonstatistical sampling is an audit sampling technique in which the risk of sampling error is estimated by the auditors using professional judgment rather than by the laws of probability. Statistical sampling involves the quantification of the risk of sampling error through the use of mathematics and laws of probability. 9-2 Sampling risk is the possibility that the auditors will make an erroneous decision based on a sample result. To control sampling risk the auditors increase the size of their samples. Nonsampling risk is the risk of erroneous conclusions by the auditors based on any factor other then sampling. For example, the auditors may perform inappropriate tests, or they may not recognize errors in the sample items examined. Nonsampling risk may be controlled by adequate planning and supervision of engagements, and the establishment of effective quality control policies and procedures. 9-3 The physical representation of the actual population is the recorded value that represents the population. For example, if the auditors use a computer printout of recorded accounts payable from which to sample, they must attempt to determine that it properly includes all accounts payable. 9-4 All three of the methods of selecting items for examination (random number table selection, systematic selection, random number generator selection) will produce a random sample if properly applied. However...
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...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. ` On August 14, 2014 the Securities and Exchange Commission (SEC) brought charges against Donald S. Troth, CPA for insider trading. The allegation by the SEC was Donald S Troth purchased stock in O’ Charley’s restaurant using information from a client that paid him for tax advice. Troth also told two other clients (James A. Nash and Blair G....
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