...investments in Enron and many employees being prosecuted by the criminal court system. One of the major responsibilities of a CPA is to remain and act ethical inside and outside of the business. Confidentiality is a major ethic hassle many CPAs have had a difficult time with. The information in a company is vital to the operations of the company. Leaking the vital information to the public or to the company’s competitors is an unethical action. When a CPA is hired by a company to review the financial statements of a company, which is their only job they must do. Preparing income tax refund papers, giving tax advice, or any other information to the management of the company is against the scope of practice what the CPA was hired for. When misstatements, errors, or misclassifications are found in the financial statements, the CPA is responsible for making note of the adjustments to be made and turn the information back to the company for correction. The CPA is not required to perform the error corrections due to it is the accountant’s job. Difference between a Review and an Audit A review is just a review of the...
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...ordinary audit of financial statements is the expression of an opinion on: | | the fairness of the financial statements | | CORRECT | | | the accuracy of the financial statements | | | | | the accuracy of the annual report | | | | | the balance sheet and income statement | | | 2. The auditor's best defense when material misstatements are not uncovered is to have conducted the audit: | | in accordance with auditing standards | | CORRECT | | | as effectively and as reasonably possible | | | | | in a timely manner | | | | | only after an adequate investigation of the management team | | | | | | | | | | | | | 3. Which of the following statements is most correct regarding errors and fraud? | | An error is unintentional, whereas fraud is intentional. | | CORRECT | | | Fraud occurs more often than errors in financial statements. | | | | | Errors are always fraud and fraud is always errors. | | | | | Auditors have more responsibility for finding fraud than errors. | | | 4. Which of the following statements is true of a public company's financial statements? | | Sarbanes-Oxley requires only the CEO to certify the financial statements. | | | | | Sarbanes-Oxley requires only the CFO to certify the financial statements. | | | ...
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..._____________ We thank Wendy Hsu, Tasha Grieve, Dessalegn Mihret, Lalith Seelanatha and Anthony Vu for data collection assistance. We also acknowledge the financial support of the Accounting and Finance Association of Australia and New Zealand (AFAANZ), UWA Business School and the University of Southern Queensland. We thank Millicent Chang, John Holland, Izan and seminar participants at Monash University and the University of Queensland for their helpful comments. We particularly acknowledge the assistance of Philip Brown and John Preiato in the preparation of this paper. IFRS adoption and analysts’ earnings forecasts: Australian evidence Abstract We study 145 large listed Australian firms to explore the impact of IFRS adoption on the properties of analysts’ forecasts and the role of firm disclosure about IFRS impact. We find that analyst forecast accuracy improves and there is no significant change in dispersion in the adoption year, suggesting that analysts have benefited from IFRS adoption. We measure firms’ IFRS impact disclosures in their financial statements issued at the end of the transition and adoption years. Transition year disclosure was not associated with forecast error and dispersion in the adoption year. However, more disclosure by firms during the adoption year (proxied by their adoption year-end financial...
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...Vincent Mokwenye ACCA 545- Financial Reporting Monday December 18, 2012 Memorandum- CPA Report MEMORANDUM Date: December10, 2012 To: Libby Grimes Re: CPA Report This memo is in response to the request for information from the CPA firm examining our subsidiary. The memo addresses information regarding the methodology used to determine deferred taxes, the various procedures used for 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...
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...Overstock.com restates their financial statements for the last three quarters and their 2008 consolidated financial statements. According to Caleb Newquist, this will be the third restatement for the last three years. Sam Antar, who exposes Overstock.com financial misdeeds, states that Overstock lacked sufficient number of accounting professionals with the essential knowledge, experience and training to effectively account for and perform effective supervisory reviews of significant transactions that resulted in misapplications of GAAP. And that information technology program change and program development controls were inadequately designed to prevent changes in accounting systems which led to the failure to appropriately capture and accurately process data. Sam reported in his blog that Overstock.com violated Generally Accepted Accounting Principles (GAAP) in its accounting for recoveries of amounts due from under billed fulfillment partners. Overstock.com should have restated its financial reports to reflect income when it was actually earned from those fulfillment partners, less a reasonable estimate for uncollectable amounts. Overstock.com took income that should have been reported in prior reporting periods (Q3 2008 and before) and moved it to future reporting periods (Q4 2008 and later) to materially overstate its financial performance in those later reporting periods. Overstock.com increases its future financial performance. Operational errors in the amounts that the...
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...understanding of the arrangements for our audit of the financial statements of Apollo Shoes, for the year ending December 31, 2015. We will audit the Company's balance sheet as of December 31, 2015, and the related statements of income, retained earnings, stockholders equity, and cash flows for the year for the purpose of expressing an opinion on them. The financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on the financial statements based on our audit. We will conduct our audit in accordance with Generally Accepted Auditing Principles (GAAP). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. It will require examination through various tests and evidence supporting the amounts and disclosures in the financial statements. The audit will also include assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit will provide a reasonable basis for our opinion. Although the audit is designed to provide assurance to detect error and irregularities that are material to the financial statements, it is not designed and cannot be relied upon to disclose all fraud or other irregularities. However, we will inform you of any material errors, and all irregularities or illegal acts, unless they...
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...the terms of our engagement to audit the financial statements of Bank of America, which comprise the balance sheet as at December 31, 2013, and the statement of income, the statement of comprehensive income, statement of changes in shareholders equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Objective, scope and limitations Our statutory function as auditor of Bank of America is to report to the shareholders by expressing an opinion on Bank of America annual financial statements. We will conduct the audit in accordance with Canadian generally accepted auditing standards and will issue an audit report. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to error or fraud. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. It is important to recognize that an auditor...
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...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 it becomes a subsidiary. The two main reasons why companies become subsidiaries is either management or financial issues that the company may have. A subsidiary company need for a company to come in to provide controls and stability in the company structure. A subsidiary is able to keep the...
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... The key element to maintaining any hospital, ambulatory care center, or private medical office is to have a structured financial statement and a team of accountants to audit the establishment. The generally accepted accounting principles that are reviewed include entity concept, going-concern concept, matching principle and cash vs. accrual accounting, the cost principle, objective evidence, materiality, consistency, and full disclosure. The “certified professional accountants are required to indicate whether an audited set of financial statements is in compliance with generally accepted accounting principles” ( (Finkler, Kovner, & Jones, p.104, 2007). The entity concept focuses on the object of study whether it may be a hospital, urgent care center, nursing school, or a private medical office. The intention of the concept is for identification purposes. It is related to health care, for example, a hospital may be affiliated with a long term care facility, a nursing school, and medical office. The hospital is considered as one entire entity. A long term care facility, nursing school, and medical office are considered subentities. The financial statements are prepared separately for each of the identified subentities. The second factor of the generally accepted accounting principle is the going-concern concept. The goal when assessing the financial aspects of the organization is to gain a strong understanding that it will continue to grow and not go out of business. The...
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...ANSWER: The auditor should consider planning materiality. When a financial statement account exceeds the planning materiality, that account should be considered significant for both the audit of internal control over financial reporting and the financial statement audit. The more the account exceeds planning materiality, the greater it should be considered significant. 1b) What qualitative factors might cause an account that is otherwise relatively small quantitatively to be considered significant? ANSWER: AS #5 paragraph 29. Qualitative factors include: * Size and composition of the account; * Susceptibility to misstatement due to errors or fraud; * Volume of activity, complexity, and homogeneity of the individual transactions processed through the account or reflected in the disclosure; * Nature of the account or disclosure; * Accounting and reporting complexities associated with the account or disclosure; * Exposure to losses in the account; * Possibility of significant contingent liabilities arising from the activities reflected in the account or disclosure; * Existence of related party transactions in the account; and * Changes from the prior period in account or disclosure characteristics. 1c) What qualitative factors might cause an account that is greater than materiality to be considered not significant? ANSWER: Accounts that have low susceptibility to error or fraud have a low volume of activity, and that are not complex...
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...Financial and Management Accounting Unit 6 Unit 6 Structure 6.1 Introduction Objectives 6.2 Meaning Self Assessment Questions 1 6.3 Objectives Self Assessment Questions 2 6.4 Methods of preparing trial balance: Total Method and Balance Method Self Assessment Questions 3 6.5 Preparation op Trial balance Self Assessment Questions 4 6.6 Errors and their rectification Self Assessment Questions 5 6.7 Errors disclosed by a Trial Balance Self Assessment Questions 6 6.8 Errors not disclosed by Trial Balance Self Assessment Questions 7 6.9 Steps to locate the errors 6.10 Trial Balance and adjustments Self Assessment Questions 8 Terminal Questions Answer to SAQs and TQs Trial Balance 6.1 Introduction Journal and ledger are the books containing the details of business transactions which have taken place during a particular period. The purpose of these records is preparation of final accounts – trading account, profit and loss account and balance sheet. Before attempting to prepare final accounts, a summary of the transactions, as depicted by ledger should be available in a form that is easy to classify the assets, liabilities, expenses and incomes. While expenses and incomes are used to prepare trading and profit and loss accounts, assets and liabilities are presented in the balance sheet. Trial Balance stands as a bridge between primary and secondary books on one hand and final statements of accounts on the other hand...
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...balance and the amount on the financial statements? What is the effect on the financial statements of missing a step when completing the accounting cycle? There are nine steps to completing an accounting cycle which are: ϖ Analyze business Transactions ϖ Journalize the Transactions ϖ Post to ledger accounts ❖ Prepare a trial balance ❖ Journalize and post adjusting entries: Prepayments/Accruals ❖ Prepare an adjusted trial balance ❖ Prepare financial statements: Income statement Retained earnings statement Balance sheet ϖ Journalize and post closing entries ϖ Prepare a post-closing trial balance Account balances are transferred from the ledge onto the trial balance for review and adjustments, if necessary. The adjusted trial balance states a list of company’s accounts, and the balance of the account. A discrepancy found in the trial balance is adjusted to disclose accurate balance. After the account balances are entered onto the trial balance, the two columns are totaled. The totaled credit balance must be the same as the totaled debit balance; if not the trial balance is reviewed to find any errors in posting or journalizing. The adjusted trial balance assists in finding errors before financial statements are created. If a step is missed and not caught on the adjustment trial balance, the financial statement will be incorrect. ...
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...characteristics…………….6 2.4 – D – Extent disclosure on PPE align with the objective of GPFR……………..7,8 3. Conclusions and Recommendation…..…………………………………………………7,8 4. References………………………………………………………………………...………..9 5. Appendix……………………………………………………………………………….10,11 Executive Summary: The Board of Directors of Fairfax Media Limited discussed the importance of ensuring that this years financial reports should meet the objective of general purpose financial reporting and along with that the qualitative characteristics as outlined in the 2010 Conceptual Framework. The aim is to examine Fairfax Media Limited’s 2013 Annual Report and how the relevant disclosures in the company’s report concerning to PPE align with the Conceptual Framework’s objectives and qualitative characteristics. Introduction: Fairfax Media Limited is a prominent multi-platform media company throughout Australasia. The Fairfax Media Limited stock price is currently trading at $0.9600 and is currently in an upward trend. Fairfax Media financial reports are based on the International Financial Reporting Standards (IFRS) that is issued by the International Accounting Standards Board (IAS) to improve performance and quality of its reports for the company. This report’s purpose is to identify whether Fairfax Media Limited...
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...Financial Management for NPO I. Introduction “Ten years ago, management was still a dirty word for those involved in nonprofit organizations. Nonprofits prided themselves on being free of the taint of commercialism and above such sordid considerations as the bottom line… Today, nonprofit organizations have learned that they need management and leadership even more than business does…” (Montana and Petit, 2009) The years when “management” was a prohibited word in nonprofit organizations are long gone. Nowadays, nonprofit leaders are starting to realize what an essential role financial management plays in NPOs. Moreover, as the number of nonprofit organizations around the world keeps rising, more nonprofit leaders and managers have aimed to develop their skills in financial management. As a matter of fact, the nonprofit sector is one of the fastest-growing sectors around the world: just in the United States there are 1.5 million nonprofit organizations and growing, employing one in 10 American employees. In this paper, we will look at: 1) the financial management process, 2) the importance of financial management for nonprofit organizations, 3) financial management for nonprofits organizations. II. What is Financial Management? One of the most accepted definitions of financial management was given by Kuchal, stating that “Financial Management deals with procurement of funds and their effective utilization in the business” (as cited in Paramasivan & Subramanian...
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...reporting is consistent with the Generally Accepted Accounting Principles (GAAP). In addition, I will evaluate the company to ensure their methodology is acceptable for determining deferred taxes and that their procedures for reporting accounting changes and/or error corrections is being carried out correctly. Lastly I will audit fictitious corporation to ensure that the company’s rationale behind establishing one of their newer subsidiaries as a corporation. Methodology for determining deferred taxes We will look to see how the company is treating their deferred taxes and which methodology they should be using. The company should be determining deferred taxes based on the prior year’s difference between income tax expense and its income tax payable. It is important that there will be differences that arise between fictitious corporation’s income tax expense and income tax payable as this company uses the full accrual method for financial reporting but when looking at taxes they are evaluating based on a modified cash basis. Procedures for reporting accounting changes/error corrections We will look to see how fictitious corporation is reporting their accounting changes. We are also intending to look at any error correction to ensure they were handled appropriately as well. I will be sure to first start off by informing fictitious corporation that we as an audit firm do not recommend accounting changes unless they are definitely determined to be necessary from an internal...
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