Standards-Based Decision Making Eth/376 May 20, 2013 Learning Team "A" Standards-Based Decision Making ABC Corporations is a publically traded corporation and is a major nationwide merchandiser. ABC Corporation has hired a CPA firm named Green and Associates to perform an external audit. During the research, Green and Associates discovered that ABC switched their inventory valuation methods from FIFO to LIFO, which has caused some concerns. This paper will cover the audit opinions, whether or not ABC is in agreement with the SOX, GAAP, and GAAS, and the ethical issues involved in this case. Four types of audit opinions There are four different types of opinions that Green and Associates could provide at the end of the financial audit of ABC Corporation.
7.1 Ligund Pharmaceuticals 1. Engagement risk may be defined as the risk of becoming involved with a client whose management lack integrity. Factors that should be considered are the accounting framework and principles used by management, management integrity, and firms that are going bankrupt or are a going concern. Professional responsibilities are affected because there is a greater chance of issuing an unqualified opinion on financial statements that are material misstated. 2.
Simpler questions would be “Is Dr. Smith’s intentional practise of omitting important information relevant to his client’s treatment ethical?” or “Is Dr. Smith’s failure to report his client’s actions to the authorities morally justifiable?” Both would be good questions, but I believe the question the study guide asks us to consider embrace both of these questions. The possible answers to the question are “yes” or “no”. I will be using rule-based utilitarianism and Kantian deontology to analyse this case study. There is not enough information to consider act-based utilitarianism: Act-based utilitarianism essentially says that one should perform that act which will bring about the greatest amount of good (“happiness”) over bad for everyone affected by the act. Each situation and each person must be assessed on their own merits (Thiroux, 2004, p. 42).
2. What is the correlation between accepting high-risk audit clients for large fees and the audit company’s perceived lack of independence and under what circumstances should those engagements be avoided? 3. When an auditor determines that a client has significantly material related party transactions how does this discover affect his audit and what are the measures for determining that such transactions are properly recorded? 4.
The EITF had to come to obtain both timely responses to emerging issue while preventing the very possible standards overload through the use of excessive new pronouncements. Some issues that the “EITF review are changes to existing and new types of transactions new types of securities, and new products and services”. (Richard G. Schroeder, 2011) Between the members of the Emerging Issues Task Force which are directors of accounting and auditing firms, FASB director of research and then auditors themselves, issues are raised to the EITF and it is the task force’s responsibility to make decisions on how to solve the issues and whether or not the solution requires an actual FASB pronouncement. Once the decision is made, an issue summary is
(1) Prejudicial exemption and public information－J.P. Morgan concerns that the ED doesn’t make clear exemption from disclosing information that may do harm to companies. (2) Attorney-client privilege－J.P. Morgan thinks that the existing disclosing requirement of claim amounts is generally appropriate. Too much additional information of claim amounts would allow the opposing parties to use this information and waive attorney-client privileges.
96 were that audit documentation be sufficient for an experienced auditor to understand. Several guidelines stated that auditors could not (a) use oral explanations alone to support their work or conclusions, (b) must provide new guidance for determining the date of the auditor’s report, (c) establish a time limit of 60 days for assembling the audit team, and (d) establish a minimum period for retaining the audit documentation (Lynford, Gretchem, Ahern & Whittinton, 2006). Analyze the fraud risk factors presented during the 2000 Nextcard audit and how each should have impacted the audit procedures. Although NextCard executives realized early there were huge flaws in the business process created by NextCard’s CFO Jeremy Lent, executives and upper management continue to set in motion Lent vision of making NextCard the world’s number one credit card distributer. The first fraud risk presented in this case study was the incentive and pressure faced by Jeremy Lent and some of his top executives of obtaining a goal of one million credit card customers
The new changes have been difficult to accommodate within the existing budget and timeline. The client did not take into consideration the fact that, adding new requirements would greatly affect the projects schedule. The legal principle here should be that, companies need to stick to the agreed upon contract clauses and in the event of change like system requirements, the involved parties should amend the contract by revising the relevant clauses to capture the new terms and conditions. In simulation, performance and delivery schedule disputes were resolved by agreeing to revise the terms that included recruiting and scaling up the team members on the Span Systems side in order to speed up the delivery schedule. The quality issue was to be addressed by
AMERITRADE COST OF CAPITAL ANALYSIS Questions: 1. What factors should Ameritrade management consider when evaluating the proposed advertising program and technology upgrades? Why? Ameritrade management should consider the opportunity cost of capital for the proposed advertising program and technology upgrades. It is important that Ameritrade not emphasize it’s company cost of capital, which is the opportunity cost of capital for investment in all the firm’s assets, and therefore becomes problematic if the firm is looking at a new project/asset (because most likely this new project will be more/less risky than the firm’s exist business).
Jaime Bejar T 6:10-10:00 Acct.434 Major Case Study 1) A few of the accounting techniques used by Cendant to manipulate financial results were as follows. They manipulated recognition of the company’s membership sales revenue to accelerate the recording of revenue. Another manipulated technique was improperly utilizing liability accounts related to membership sales that resulted from commission payments. The last accounting technique was consistently maintaining inadequate balances in the liability accounts and on occasion reversing the accounts directly into operating income. Some of the events that happened in connection with these accounting techniques being manipulated were being done for long periods of time.