...Feature Product or service Product features Attestation Framework Audit opinion - a professional judgment Claims viewed as challenges to auditor reputation Based on negligence laws Duty of care doctrine determined by common law Essentially unlimited dependent on losses sustained Essentially unlimited, although limited by statements of subsequent periods Adherence to professional standards Must be independent Based primarily on time spent which is related to the risk - often fixed in advance A n integral part of the audit process with pervasive effect Professional training environment with focus on accounting and auditing Insurance Model Insurance policy - a contractual obligation Objective is to pay legitimate claims -failure to pay affects reputation Based on insurance contract Specific insured parties as stated in the policy Contractually limited to a fixed amount Limited to policy term Nature of liability Who can seek compensation Amount of compensation Period of exposure Key success factor Effective underwriting and claims handling - auditing standards not relevant Independence unnecessary Based on insurance risk determined by underwriting process A similar role to auditing important to underwriting Specialists in diverse fields with analytical approach to business Relationship with customer Pricing Role of judgment Operating structure While there are important structural differences between the two models, perhaps the single most significant difference...
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...Financial Statement Insurance System For years, investors in Chinese companies have used the reputations of outside auditors, institutional investors, and global investment banks as a proxy for reliable financial reporting. In fact, the Securities and Exchange Commission led to increasing battles with Deloitte Touche Tohmatsu, which discovered the bookkeeping fraud at Longtop Financial Technologies of China. Deloutte audited the company’s book and stated that Longtop sill recorded $332 million off-balance sheet (S.E.C. clashes with deloitte in China over fraud, 2011). However, this has become worse. Since March, Chinese Government announced that more than two dozen companies said they will resign their auditors because of some accounting problems, according to the U.S. Securities and Exchange Commission. As a result, the SEC charged the overseas companies listed in the United States according to these scandals (Jubak, 2011). Since the financial statements were not disclosed transparently and accurately, even misstated, the independence of auditors in Deloitte Touche Tohmatsu obviously was lost. Nowadays, since the independence of the auditor is lacking, the fraudulent cases, such as financial misstatement, have occurred frequently in China. One major cause is that an inherent conflict of interest is created between the management of clients and the auditor. The auditors are paid by the client companies; they thus depend on CEOs and CFOs, who effectively decide...
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...CASE 1.9 ZZZZ Best Company, \nc. On May 19,1987, a short article in The Wall Street Journal reported that ZZZZ Best Company, Inc., of Reseda, California, had signed a contract for a $13.8 million insurance restoration project. This project was just the most recent of a series of large restoration jobs obtained by ZZZZ Best (pronounced "zee best"). Located in the San Fernando Valley of southern California, ZZZZ Best had begun operations in the fall of 1982 as a small, door-ta-door carpet cleaning operation. Under the direction of Barry Minkow, the extroverted 16-year-old who founded the company and initially operated it out of his parents' garage, ZZZZ Best experienced explosive growth in both revenues and profits during the first several years of its existence. In the three-year period from 1984 to 1987, the company's net income surged from less than $200,000 to more than $5 million on revenues of $50 million. When 72ZZ Best went public in 1986,Minkow and several of his close associates became multimillionaires overnight. By the late spring of 1987,the market value of Minkow's stock in the company exceeded $100 million, while the total market value of 72ZZ Best surpassed $200 million. The youngest chief executive officer in the nation enjoyed the "good life;which included an elegant home in an exclusive suburb of Los Angeles and a fire-engine red Ferrari. Minkow's charm and entrepreneurial genius made him a sought-after commodity on the television talk show circuit and caused...
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...Teaching the Analysis of Financial Statements Author(s): Grant Osborn Source: The Journal of Insurance, Vol. 28, No. 2 (Jun., 1961), pp. 35-39 Published by: American Risk and Insurance Association Stable URL: http://www.jstor.org/stable/250723 . Accessed: 13/07/2013 13:30 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. . American Risk and Insurance Association is collaborating with JSTOR to digitize, preserve and extend access to The Journal of Insurance. http://www.jstor.org This content downloaded from 139.184.30.135 on Sat, 13 Jul 2013 13:30:41 PM All use subject to JSTOR Terms and Conditions TEACHING THE ANALYSIS OF FINANCIAL STATEM ENTS GRANT OSBORN The student with a thorough understanding of the financial statement of an insurance company has a good foundation of knowledge of the entire field. In fact, it is no exaggeration to say that one interested in insurance as a career who can not interpret an insurance financial statement, has some glaring gaps in his education. Therefore, this analysis should...
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...the potential insurance settlement. Facts: Euker Corporation was impaired by the Hurricane William, which makes Euker’s manufacturing plant inoperable and has additionally forced Euker to rent temporary space in Houston to accommodate its sales department. Euker will continue to make regular month-to-month lease repayments for idle equipment in the plant because of the manufacturing plant has shut down, the processing volume of shared carrier center in Denver has decreased 40%. Analysis: Euker’s legal team has determined that Euker is entitled...
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...HCS/405 Sandra DiPietro Reporting Practices and Ethics Introduction Addressing financial reporting practices and ethical standards in health care finance can be done in various different ways. Either way this component of health care is addressed, it is important for a health care finance element, within an organization, to ensure that this is addressed correctly. A good way to explain and address the ethical standards in health care finance is by explaining the four elements of finance. These four elements include Planning, Controlling, Organizing, and Decision Making. With these four elements, addressing financial reporting practices and ethical standards in health care organizations, can be addressed, and will reflect how organizations accomplish this. Accounting Principles In health care organizations, financial reporting involves financial statements. There are four main financial statements. They are: (1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders’ equity (U.S. Exchange Commission, 2011). The third part of a cash flow statement shows the cash flow from all financing activities. It is very important for an organization to report their finances, since financial reporting will provide investors with information about the organization’s management. Financial reporting also provides information for all of management of their earnings and cash flow in which one can use...
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... The three main sections of this report are the introductory section, the financial section and the statistical section. 2. A) The entity’s annual report for 2007 was awarded a “certificate of achievement for excellence in financial reporting by the Government Finance Officers Association. This certificate is awarded when the reports meet in the standards of accounting and reporting of the Government Finance Officers Association. B) The key issues addressed in the letter of transmittal are; * The overview of City’s government and economic condition and economic outlook. * Major initiatives; Waller creek Tunnel Project, Zero Waste Initiative Redevelopment of Green Water Treatment Plan & Austin Climate Protection Plan. * Others; Financial Policies, Internal Controls, Budgetary Control, Cash Management, Risk Management and Pensions. * Certificate of Achievement for Excellence in Financial Reporting. * Acknowledgements 3. A) Yes, the city received an unqualified audit opinion. B) Yes, the report contains management’s discussion and analysis. The key issues are: Financial Highlights, Overview of the Financial Statements, Financial Analysis of the Government-Wide Statements, Financial Analysis of the Government’s Fund Level Statements, and Other Information. C) The report does provide reconciliation between total governmental net assets per the government-wide statement of net assets and total governmental fund balances per the governmental fun...
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...COUNTY OF VENTURA CAFR ANALYSIS PA615 – Public Financial Management Instructor, All Holliman California State University, San Bernardino Carrie Harmon, Scott Perkins, Dana Cano, Veronica Pinkett-Veal, Lydia Khalil, Holly Benton June 10, 2010 Contents Executive Summary 2 Cover, Table of Contents and Formatting 3 Introduction 3 Independent Auditor’s Report 5 Management’s Discussion and Analysis 6 Basic Financial Statements 6 Government-wide Financial Statements 7 Fund Financial Statements 8 Government, Proprietary, and Fiduciary Funds – Financial Statements 10 Summary of Significant Accounting Policies (SSAP) 14 Note Disclosure (other than SSAP and pension-related disclores) 19 Required Supplementary Information (RSI) 19 Combining and Individual Fund Information and Other Supplementary Information 21 Statistical Section 22 Other Considerations 23 Executive Summary The purpose of this report is to conduct a comprehensive analysis of the County of Ventura’s Comprehensive Annual Financial Report otherwise known as the CAFR. This analysis afforded the group members an opportunity to apply concepts and theories acquired through a graduate level governmental accounting course and provided the group members with a more intimate view of local government finances. The County of Ventura was selected for three primary reasons: 1) the county is located in Southern California and can easily be compared to the County of Riverside; 2) Ventura County...
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...Abstract Businesses today face heightened expectations around their role in society and the world, with turning a profit only one of many criteria by which performance is measured. Rising in importance is the impact a company has on its stakeholders, society, and even the planet. Integrated reporting, which encompasses elements of traditional financial reporting, sustainability reporting, and governance reporting within a single presentation, represents a growing trend that reflects these new expectations. The core concept underlying the term “integrated reporting” is providing one report that fully integrates a company’s financial and non-financial (including environmental, social, governance and intangibles) information. Integrated reporting offers the opportunity to centre business reporting on strategy and value creation, to demonstrate how the business uses capital and the extent to which they should continue to be invested in business. Integrated reporting is a journey. Organizations are unlikely to achieve perfection in the first year. In the absence of a generally accepted framework, companies that wish to move toward integrated reporting may encounter several dilemmas around relevance, scope, assurance and other issues. However, as reporting processes for the production of the supporting information are designed and improved and as the executive team begins to benefit from a more informed implementation of the governing structures’ decision, reporting will improve...
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...Aetna was founded in 1853 in Hartford Connecticut and is one of the nation’s leading providers of healthcare, dental, pharmacy, group life, and disability insurance, and employee benefits (Aetna, 2013). One of Aetna’s related name in the state of Florida is Aetna Health Inc. Aetna provides innovative products and services which include: a broad range of insurance and employee benefits products, they were the first national full-service health insurer to offer a consumer-directed health plan, they continue to lead the way with their full line of consumer-directed health care products and they offer a wide array of programs and services that help control rising employee benefits cost while striving to improve the quality of health care, such as case management; disease management and safety programs, integrated medical, dental, pharmaceutical, behavioral health and disability information (Aetna, 2013). They also provide its members with access to convenient tools and easy-to-understand information that can help them make better-informed decisions about their health and protect their faineances against health related risk. I was able to locate Aetna’s 2011 annual report, financial report to shareholders online. It starts with the Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) which shows an overview of earnings, cash flows and significant developments for the last three years and an outlook for 2012 (Aetna, 2013). Between 2009 and 2011...
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...production and trade. Investors can trade shares and securities worldwide. Entities are in a position to access the funds globally in the most advantageous markets. For this, investors from all over the world rely upon financial statements before taking decisions. They need to be convinced that the financial statements are true and fair and what they understand from the statements is what the person preparing them intends to convey. However, different countries adopt different accounting treatments and disclosure patterns with respect to the same economic event. This may create confusion among the users while interpreting the financial statements. Financial statements that are based on a single, universally accepted and used GAAP will enable the world to exchange financial information in a meaningful and trustworthy manner. This will accelerate the globalisation of finance. Adoption of IFRS worldwide and in India The use of International Financial Reporting Standards (IFRS) as a universal financial reporting language is gaining momentum across the globe. Several countries have implemented IFRS and converged their national GAAP to IFRS. More than 100 countries throughout the world, including the 27 European Union member states, require or permit the use of International Financial Reporting Standards (IFRSs), developed by the IASB. The number of countries adopting IFRS is expected to increase to 150 by the end of 2011. Countries such as China and Canada have announced their intention to...
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...Chapter 01 Financial Statements and Business Decisions True / False Questions 1. Accounting is a system that collects and processes financial information about an organization and reports that information to decision makers. True False 2. Assets on the balance sheet are recorded at market value or replacement cost. True False 3. In accounting and reporting for a business entity, the accounting and reporting for the business must be kept separate from other economic affairs of its owners. True False 4. The accounting period in which service revenue is recognized (i.e., revenue for services rendered) is generally the period in which the cash is collected. True False 5. Total assets are $70,000, total liabilities, $40,000 and contributed capital is $20,000; therefore, retained earnings are $15,000. True False 6. The payment of a cash dividend to stockholders increases stockholders' equity. True False 7. The accounting model for the balance sheet is: Assets + Liabilities = Stockholders' Equity. True False 8. A decision maker who wants to understand a company's financial statements must carefully read the notes to the financial statements because the notes provide useful supplemental information. True False 9. The financial statement that shows an entity's economic resources and its liabilities is the statement of cash flows. True False 10. Companies prepare...
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...derivatives can be used as “weapons of mass deception”. Enron is a classic example of this. They used phony accounting methods, including derivatives, to make their financial statements seem stronger and less risky than they actually were. The banks, that were essentially giving them loans, were also involved in this scheme. The latest news of large-scale use of derivatives to deceive is the case of Italy and Greece entering into the Euro. The government received money, which was essentially a loan, but was able to keep it off the balance sheet because of its title. This made the financial statements look better so that the country could join the Euro. The article compared this to a student cheating on entrance exams to be accepted into a better college. This article brings into question the moral and ethical decisions businesses must make regarding their financial actions. Just because something is technically legal to do, does not mean it is ethical. Key individuals, who are in charge of what a business does, need to be involved and knowledgeable enough to understand when something like this is happening. If the business is doing something to deceive others, it is probably something they shouldn’t be doing. June 27, 2013 Wielding Derivatives as a Tool for Deceit By FLOYD NORRIS Derivatives are not always “financial weapons of mass destruction,” as Warren Buffett famously called them. But they are often weapons of mass deception. For some derivatives, a desire for deception...
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...human resource representative, a marketing agent and an accountant. Our company’s operating hours are Monday through Saturday from 8.00am to 8.00pm. The business is closed every Sunday to allow employees to rest and get ready for the week ahead. The general manager is responsible for the overall management of the company; he oversees all the activities and ensures all employees work towards achieving the common goal of the company. The general manager also ensures that policies, procedures and government regulations are implemented. The human resource representative is responsible for hiring, and training employees. The accountant’s role is to ensure that the company has sufficient amount of working capital. He prepares the profit and loss statement and monthly closing and cost accounting reports. Inventory control would be a part of the general manager and the accountant’s responsibility. Our company is still growing and once it stabilizes, then we can create more departments and hire more employees. Our marketing agent’s job is to create value for our customers and create customer relationships. She conducts research and determines which markets to target and how our company can reach all these markets. b. The form of your business and the benefits it...
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...Introduction | This is the assignment for the Understanding Financial Management unit. The aim of this unit is to develop understanding of finance within the context of an organisation, as required by a practising or potential middle manager.The task requires you to demonstrate your understanding of finance and the value of recording financial information within the context of your organisation. You are then asked to explain the process of budget setting in the organisation and how budgetary techniques are used to contribute to controlling cost in your own area of operation.If you are not currently working within an organisation, then you may complete this task in relation to an organisation with which you are familiar. This could include experience working in a voluntary capacity.The tasks you need to undertake are:- * read all the questions * complete the learning activities associated with this course * discuss the assignment with your coach at your tutorial * complete any other activities that you need to undertake for your assignment * answer the questions in the spaces provided Here are some tips on completing the assignment, based on submissions from previous students: * make sure you read and answer all the questions! Even the most accomplished writers have fallen down by providing answers that are exceptionally well written – but well off the mark. This is usually because they have not gathered a full understanding of the questions before embarking on...
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