The company should have been able to follow up with all venders and customers to attest to the validity of the financial statements and they were not able to do this and not able to gather the “appropriate and sufficient evidence” needed. When a client will not allow the auditor to gather evidence needed to perform a correct auditor then the opinion can be affected. The auditor cannot attest to the fairness of the financial statements if the evidence is lacking or
Aaron Atlhea email@example.com 2012FA-BMGT 1301-31420 Chapter 17 Case 17.2 Making the Numbers or Faking the Numbers? 1. What are the ethical and legal implications of using accounting practices such as the book-and-hold technique to inflate corporate earnings? * Depending on the specific situation of the accounting fraud, it results in financial cost, prison time, and other legal punishments. * The firm or the accountant losses credibility in the market, if an accounting fraud is found.
Your boss has developed the following set of questions you must answer to explain the U.S. financial system to Della Torre. A. Why is corporate finance important to all managers? Corporate finance provides managers the ability to identify and select strategies, and projects. Additionally it allows for managers to forecast funding requirements for their company, and creates the ability to plan strategies for acquiring funds.
Lessons learned: Auditing firms can be held responsible for the misrepresentation of financial information if they don’t practice due care. Auditing firms should asses risky accounts and suspicious transactions to ensure the reliability of the financial statement. Questions 1. Identify legitimate business practices that corporate executives can use for the primary purpose of manipulating or “managing” their company’s reported operating results. Are such practices ethical?
You will be introduced to Monte Carlo analysis and you will use this to decide on the optimal capital structure for Diageo. Learning Objectives The static trade-off theory of capital structure is one of the models used to determine the optimal capital structure. While tax shield are well understood, the sources and costs of financial distress, particularly in a dynamic setting, is less understood. This case studies the capital structure decision of a firm that is undergoing fundamental changes in the business. The heart of the case is a model that is developed by the firm’s corporate treasury staff to help them think about the static tradeoff of tax shields and financial distress in a dynamic setting.
Managerial Accountants should calculate net income or loss in a manner that accurately reflects the closest true costs and profits as determined by the International Federation of Accountants (IFA). To effectively help Management Accountants do this, the IFA has set in place a code of conduct that should regulate the integrity, competence, confidentiality, and credibility of a corporation. Introduction To fully understand the ethical issues of Managerial Accounting, you must first assess the difference between Managerial Accounting and Financial Accounting. Financial accounting is used for to present the status of the company to external sources such as board of directors, investors, auditors, and for reporting purposes as well. The financial side of accounting is used to represent the company’s current standing based on the past profits, net income, bad debts, and current ratio of assets to liabilities.
Clearly, Michael, serves as vice chairman, president, CEO, COO, and CFO have responsibility on internal control. 2. What were the problems in the corporate governance and/or organization structure? What are the major requirements of SOX with respect to corporate governance and/or organization structure? How would corporate management and the accounting function be better organized?
The presence of independent directors in an audit committee ensures compliance with the standards and statutory requirements and accordingly the issuance of unqualified audit report (Carcello and Neal, 2000). The independence of an audit committee is expected to be reasonably compromised if the audit committee is not solely composed of independent directors (Bronson etal., 2009). Using this reasoning the quality, competence and independence of an audit committee is reinforced by non affiliated directors who will monitor the financial reporting process (Choi etal., 2004) and reduce information asymmetry (Beasly and Salterio 2001). However, an audit committee which is fully comprised of independent directors improves earning informativeness and accordingly (Woidtke
The board’s action depends on regulations, laws and shareholders in general meeting. The auditor's role is to supply the shareholders with an objective and external inspect on the directors’ financial statements which form the foundation of that reporting system. The objective of the audit Committee is to raise the standards of corporate governance and the level of confidence in financial auditing and reporting by indicating obviously what it sees as the respective liabilities of those involved and what it believes is expected of
What are agency problems? * Occurs when managers act in their own interests and not on behalf of owners (stockholders) What is corporate governance? Corporate governance is the set of rules that control a company’s behavior towards its directors, managers, employees, shareholders, creditors, customers, competitors, and community. d. What should be the primary objective of managers? * The primary objective should be shareholder wealth maximization.