E2-1 (a) Accounting rule-making that relies on a body of concepts will result in useful and consistent pronouncements. TRUE (b) General-purpose financial reports are most useful to company insiders in making strategic business decisions. FALSE. General-purpose financial reporting helps users who lack the ability to demand all the financial information they need from an entity and therefore must rely, at least partly, on the information provided in financial reports. However, an implicit assumption is that users need reasonable knowledge of business and financial accounting matters to understand the information contained in financial statements.
What accounting assumptions necessitate the use of adjusting entries? What accounts are subject to adjusting journal entries? What are the advantages and disadvantages of using automated accounting systems to do adjusting entries? What are your thoughts on making adjusting entries; are they really needed or is this just extra work by accountants? Which basis of accounting do most companies use, cash or accrual?
One huge internal control concern with LJB Company is violation of the segregation of duties internal control principle. The accountant should not serve as Treasurer and Controller. The same employee should not be responsible for related activities and record keeping should be separate from physical custody of the asset. By having the accountant order, pay and receive supplies increases the risk for fraud because they handle related purchasing activities. They can easily use fraud to authorize payment for a false invoice.
We are primarily concerned about controls over the reliability of financial reporting and the controls over classes of transactions, as the accuracy of the accounting system outputs depends on the accuracy of inputs and processing. We have significant responsibility for the discovery of material fraudulent financial reporting and misappropriation of assets, and must perform audit procedures to identify noncompliance with laws and regulations that may have a material effect on the financial statements. Internal controls, if properly designed and implemented, can be effective in preventing and detecting fraud. Therefore, we are concerned with Apollo’s internal control over the safeguarding of assets and compliance with laws and regulations if they affect the fairness of the financial statements. Although we are less concerned with controls that affect the efficiency and effectiveness of the company’s operations, we will pay attention to controls affecting internal management information, which is an important source of evidence that helps to determine whether financial statements are presented
(b) What are the ethical issues involved in this situation? The ethical issues involved in this situation pertain to following accepted accounting principles. Violating the generally accepted accounting principles to satisfy a short-term personal or company would create misleading financial statements. This situation would therefore be unethical. Robbin Industries is jeopardizing itself by not properly reporting the advertising costs.
Answer to questions: The ethical issues involved in the Madoff case was his misconduct and deceitful activity. He lied to investors, cheated out his financial interests, and stole from thousands of people around the world. He took money from new clients and paid it out to existing clients. I don't believe that Madoff worked alone. Even if nobody helped him deceive investors, people knew about it, and the act of knowing and not reporting a white-color crime is guilty by association.
In 2001, the United States faced its biggest financial market fraud scandal by the worldwide known corporation Enron. The top management was found guilty for using accounting loopholes to overstate revenues and stock price. The discovery of the Enron scandal lead to the exposure of several more corporate fraud cases from more well-known companies including WorldCom. This decreased the confidence in our markets and question the adequacy of the United States disclosure practices and the reliability in the required independent audits. Consequently, the biggest accounting legislation was passed known as The Sarbanes-Oxley Act of 2002.
Ethicality of Accounting Activities The WorldCom case is an example of unethical behavior performed by a company by abusing accounting activities to reflect misleading financial information. In this case the main cause of this unethical behavior is greed and neglect by the executives that allowed and encouraged this behavior. On the other hand, WorldCom employee Cynthia Cooper is a prime example of ethical behavior that took place to uncover the wrong doing of individuals. Upon reading an article of a former financial analyst, Cynthia Copper’s mind was intrigued, an audit was conducted on capital spending. In the WorldCom and Cynthia Cooper case unethical behavior was evident in multiple departments and involved top key players that tried to cover up the fraud.
It is a review of management and how operating procedures work. How effective and efficient the procedures are for the company. Although operational audits reveal possible problems in the financials statements, a compliance audit and fraud audit will help Whitfields internal
The objective of an audit of financial statements is to enable the auditor to express an opinion whether the financial statements are prepared, in all material respects, in conformity with an identified financial reporting framework of Generally Accepted Accounting Principles. In essence, materiality should function as a cut-off threshold to determine the nature of the audit testing. Auditors should not reveal its materiality level to clients because clients might take advantage of it to deceive the auditors and make its financial statement better. When the Deloitte auditors are suspicious of certain accounts, they not only can’t reveal it but also make more substantive investigation into these accounts. Question 4: Existence: the