...[pic] SOUND FINANCIAL REPORTING IS A GOOD THING FOR BRINGING CONFIDENCE BACK TO THE CORPORATE WORLD Submitted By: Ahmed Shafiul Huq 801414063 Principle of Accounting (EIB505) Section: B Executive Master of Business Administration Submitted To: Mr. Mohammad Rakib Uddin Bhuiyan Assistant Professor Department of International Business Faculty of Business Studies EXECUTIVE SUMMARY A company’s financial reporting amalgamates important documents to create an effective spreadsheet to simplify the financial data of an organization. It captures much of the information that organizations prepare, publish, and use. Financial reporting plays an integral role in the capital markets and economic stability and growth, and efforts to enhance its quality are vital. A Sound Financial Reporting provides us relevant, meaningful, reliable, accurate and comprehensive reporting of management stewardship whether in the form of numbers or other operating data. It is increasingly important for businesses to be financially transparent and for governments to establish a sound regulatory environment for corporate financial reporting. Sound financial reporting can benefit business by some ways just like valuing business, easy to identify...
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...Disclosure and transparency According to McGee (2009), the corporate governance framework should ensure timely and accurate disclosure is made of all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company. According to IOSCO (2010), disclosure and transparency are critical elements of a robust corporate governance framework as they provide the basis for informed decision-making by stakeholders. High quality disclosure and transparency helps the public understand the company’s activities, policies and performance with regard to environmental and ethical standards as well as the relationship of the company with the stakeholders. The Global Financial Crisis has demonstrated how poor quality disclosure and lack of transparency can mask excessive risk-taking and leveraging by global financial institutions. Hence, high quality disclosure and transparency not only serves to protect investors but helps regulators in maintaining market confidence and systemic stability. The strengthening of disclosures and transparency involves actions by a range of market participants as it covers processes from verification, the determination of information for the publication and communication. Quantitative and qualitative corporate information is then disseminated through various periodic reports such as the annual and quarterly reports, other disclosures and through various media or other stakeholder engagement sessions...
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...forming a business. (Sitarz, 21) Advantages and Disadvantages of the four business forms of organization The most common and simplest form of business organization is sole proprietorship. It is the least regulated of all types of business structures. Sole proprietorship is the traditional unincorporated one-person business. The advantages of sole proprietorship are: less expensive to start up, owners have full control over management decisions, owners receive the profits, and they can transfer or sell the business at their discretion. Some disadvantages to choosing sole proprietorship is that all of the business and personal assets of the sole owner are at risk, and the difficulty of the sole proprietor obtaining a business loan from financial institutions due to the possibility of small business failures. A further disadvantage is if the owner dies, the business cease to exist. The assets and liabilities of the business are passed to the heirs of the owner, but the...
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...Sugar Investment Trust (SIT) annual report: 3 3.0 The Five potential users 5 4.0 How useful are companies’ annual reports in addressing the needs of users of accounts? 6 5.0 Company’s Corporate Social Responsibility (CSR) 8 6.0 To what extent does the regulatory framework govern the preparation of an Annual Report? 9 7.0 To what extent reported profit figures can mislead users of accounts? 10 8.0 Cash flow statements 11 9.0 Accounting Ratios and Cash Flow Statement Analysis 11 10. Cash Flow Statement Analysis 14 11. Criticism of traditional financial accounting and problems encountered in inter-firm comparison. 14 12. Contribution list 16 13. References 16 1.0 Introduction T he Sugar Investment Trust (SIT) is a body corporate established under an Act of Parliament in 1994 which operates as a company under the Companies Act 2001. It is the largest shareholder based public company in Mauritius with more than 40,000 members. It has more than 55,000 shareholders. The foundation of Sugar Investment Trust (SIT) constitutes a landmark in the Mauritian history. It was set up primarily as a participation scheme in the sugar industry but it has become a model of economic democratisation in the country. It provides a forum for participation of planters and workers at corporate decision making level of sugar milling companies and as equity participation. Therefore, it ensures a share of profit with a fair rate of return on investment to all shareholders. 1.1...
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...determine a security’s value by focusing on underlying factors that affect a company's actual business and its future prospects. On a broader scope, you can perform fundamental analysis on industries or the economy as a whole. The term simply refers to the analysis of the economic well-being of a financial entity as opposed to only its price movements Fundamental analysis serves to answer questions, such as: • Is the company’s revenue growing? • Is it actually making a profit? • Is it in a strong-enough position to beat out its competitors in the future? • Is it able to repay its debts? • Is management trying to "cook the books"? The term fundamental analysis is used most often in the context of stocks, but we can perform fundamental analysis on any security, from a bond to a derivative. As long as we look at the economic fundamentals, we are doing fundamental analysis. For the purpose of this tutorial, fundamental analysis always is referred to in the context of stocks. Intrinsic Value of Fundamental Analysis: Intrinsic value is one of the primary assumptions of fundamental analysis is that the price on the stock market does not fully reflect a stock’s “real” value. In financial jargon, this true value is known as the intrinsic value. For example, let’s say that a company’s stock was trading at $20. After doing extensive homework on the company, we determine that it really is worth $25. In other words, we determine the intrinsic value of the firm...
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...other non-financial information by shareholders and users of financial statements. In early 2000’s the stakeholders and shareholders are only concerned with the financial performance but now the trend has changed as that the shareholders and stakeholders who believed that the organization should be responsible to the environment and society in which they operate the business, and therefore it needs to be good for the community. This has caused that many laws and regulations such as environmental and social laws, employment laws, anti-corruption laws and good governance laws developed by the states to protect the environment and social issues icons. The concept of social responsibility has been raised in the context of this because the organization must be committed to run the business ethically and contribute for the growth of the economy, and at the same time improving the standard of life of employees and their families as well as for the society they operate their business and future generation. REQUIREMNT OF THE CURRENT CONCEPTUAL FRAMEWORK Conceptual framework is a guideline issued by international accounting standard board (IASB) for the development of international accounting standards (IAS). It is a practical tool that assist IASB to develop standards and assist preparers to develop consistent accounting policies when there is no standards and assist others stakeholders to understand and interpret the standards. It states that the objective of financial reporting...
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...1.0 Introduction Flat Cargo Berhad (FCB) is an air freight services and ground handling company. Its company’s operations cover Asian Pacific region including China, Japan, Thailand, Singapore and many more. Their main customers are United Parcel Services (UPS), City Link and Nationwide Express. The main shareholder for FCB is Bangor Sdn Bhd which is part of Miri Group represented by 26.5% of the company interest. Kencana & Associates is the auditor company that audit FCB’s account. The leader of the auditors is Mr Chuah Mun Soong. The auditing team found some irregularities in accounting record of FCB. There are two parties which Mr Chuah has to report, they are his superior, Mr Keong Chee Wah and FCB Audit Committee. However, Mr Chuah concerns that FCB might have a fraud due to the past experience such as Media Com and Blue Vital. 2.0 The Root Cause of the Problems As per our discussion about this case study, we managed to find out several root cause of the problems. 2.1 Rising of Oil Price The first root cause is the rising in oil price in the year 2005. In the year 2005, there was an international crisis occurred with the exceptional increase in oil prices. The hike started in mid-2004 at US$40 per barrel but eventually, the increase continued to stages of US$50, US$60, US$65, US$70 and US$80 per barrel. The price hike in fuel surcharges drastically affected the freight forwarding industry significantly because of its reliance on fuel for operations. This...
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...In response to the many scandals in corporate financial reporting, the United States Congress passed legislature in 2002 that required publicly traded companies to contain within each annual report an internal control report. The internal control report requires companies to state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting. The internal control report must also contain an assessment of the effectiveness of the internal control structure and procedures of the issuer for financial reporting. These rules are referred to as and contained in Section 404 of the Sarbanes Oxley Act (“SOX”). This paper will touch upon an introduction to the SOX Act,...
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...DO ACCOUNTANTS NEED TO CONSIDER THE ECONOMIC CONSEQUENCES OF FINANCIAL STATEMENTS? Table of Contents Introduction……………………………………………………………………...................1 Accountants and the Statements They Produce…………………………………………...1 Users of Financial Statements……………………………………………………………..2 A Key Starting Point for Users……………………………………………………………4 Economic Consequences through Adopting New Accounting Standards…………………6 Accounting Regulation and Its Purpose……………………………………………………7 Conclusion…………………………………………………………………………………8 References………………………………………………………………………………….9 Introduction Economic consequence is a concept that asserts, despite the implications of efficient securities market theory, choices of accounting policies can affect a firm’s value. In William Scott’s writing, he states “Zeff defines economic consequences as “the impact of accounting reports on decision-making behavior of business, government and creditors.” The essence of this definition is that accounting reports can affect real decisions made by managers and other users rather than simply reflecting the results of these decisions.” Every accounting rule puts some parties related to an enterprise at an advantage over another. If accounting standards can be used to give advantages to managers of an enterprise, they will be more likely to choose standards that benefit themselves more. This can lead to investors of the enterprise to a disadvantage as managers may have different objectives. Firm’s accounting policies matters...
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...Sintok, 06010 Kedah Malaysia. Abstract Cooking the books refers to fraudulent accounting activities undertaken by a business to falsify its financial statements. Thus, the objectives of this study are to investigate what the cooking-the-books activities carried out by businesses consist of, how they conduct them, and what the impact is on the business and its shareholders. The case study sample companies are two Malaysian companies that had received various awards from reputable third-party organizations. On the other hand, the activities undertaken in both companies have caused them to be labelled as Malaysian mini Enrons. We employ a qualitative research methodology as most prior research employs a quantitative methodology to investigate the determinant factors in businesses’ cooking-the-book activities. The result of the study shows that the managers have used their positions, prior experience, and regulatory loopholes in their activities. Furthermore, the financial report restatement and higher reported earnings are the early warning signals of their activities. As a result of this, the Malaysian Securities Commission has revised the corporate governance code, and among others incorporated the Audit Oversight Board, known in the US as the Public Company Accounting Oversight Board. Key words: Cooking the Books, Financial Statement Fraud, Earnings Management, Malaysia, Developing Countries 1. Introduction Belkaoui defined accounting as “the process of identifying, measuring...
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...CORPORATE REPORTING AND ANALYSIS By Dr. S.A.S. ARUWA[1], CNA ____________________________________________________________________ Being a paper presented at ANAN Practitioners’ Forum at Mainland Hotel, Lagos on 3rd August, 2010 ____________________________________________________________________ Abstract Good corporate reporting is generally an indication of competitiveness and superior corporate governance. Good reports show initiative and effort on the part of the preparers. Significant changes in the corporate external reporting environment have led to proposals for fundamental changes in corporate reporting practices. A variety of new information types are been demanded, in particular forward-looking, non-financial and soft information. Openness and transparency in annual reporting on an unprecedented scale may be inevitable with the adoption of International Financial Reporting Standards (IFRS) and Nigeria’s commitment to adopt IFRS; Nigerian companies will have no alternative but to bring themselves up to speed. One way is to ensure that company’s reports actually reflect good governance. INTRODUCTION Good corporate reporting is generally an indication of competitiveness and superior corporate governance. Good reports show initiative and effort on the part of the preparers. “The better reports always address all the required relevant information concisely, and disclose thoroughly the measures taken – including on activities, corporate policy, strategic plans...
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...Clause 49 of Listing Agreement The company agrees to comply with the following provisions: I. Board of Directors (A) Composition of Board i. The Board of directors of the company shall have an optimum combination of executive and non-executive directors with not less than fifty percent of the board of directors comprising of non-executive directors. ii. Where the Chairman of the Board is a non-executive director, at least one-third of the Board should comprise of independent directors and in case he is an executive director, at least half of the Board should comprise of independent directors. Provided that where the non-executive Chairman is a promoter of the company or is related to any promoter or person occupying management positions at the Board level or at one level below the Board, at least one-half of the Board of the company shall consist of independent directors. Explanation-For the purpose of the expression “related to any promoter” referred to in sub-clause (ii): a. If the promoter is a listed entity, its directors other than the independent directors, its employees or its nominees shall be deemed to be related to it; b. If the promoter is an unlisted entity, its directors, its employees or its nominees shall be deemed to be related to it.” iii. For the purpose of the sub-clause (ii), the expression ‘independent director’ shall mean a non-executive director of the company who: a. apart from receiving...
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...of Assets 2. Efficiently manage its assets to ensure liquidity 3. Finance the needs of Corporate, medium and small scale as well as individual clients. 4. Join syndicates with other banks and financial institutions. The importance of these objectives is to ensure that clients who borrow from the bank have the ability to repay the funds they borrow on schedule and with interest. Businesses that borrow from the bank should demonstrate an ability to repay from their current and future net cash flows of the business. Individual client's repayments depend also on their personal cash inflows basically being their salaries. Another importance is the need to avoid bad debt as much as possible by not giving credit to clients who are likely to be unable to repay due to their peculiar circumstances. Also the bank must ensure that at all times it is able to meet its obligations to depositors since its stock in trade is money. This it does by diversifying loans it has given (assets) to have a wide array of maturity profiles. Also it ensures that its assets are properly matched with its liabilities to avoid the situation where it borrows short term from depositors and lends out long term to needy units. SOURCES OF FUNDS The sources of funds for the banks business are mainly deposits, shareholder's equity and retained earnings, sale of liquid assets and borrowing from offshore financial markets. USES OF FUNDS The funds sourced are used for lending,...
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...good legislative and judicial environment during the early stages of the development of the profession, in China, a market-oriented legislative and judicial environment is still emerging. D. Unlike in the U.K., where auditors receive support from the established professional bodies, these support mechanisms are still lacking in China. II. The recent economic reform program stimulated the growth of the accounting profession in China. A. With the recognition by the State of joint stock company form, the demands for financial information from investors and other interested parties increased. B. The establishment of two stock exchanges helped rapid growth of the accounting activities. C. Various government regulations on the implementation of economic reform measures require the involvement of independent auditors. D. The laws on joint ventures with foreign companies require the audit of annual statements. E. International accounting firms were allowed to be involved in training local auditors and setting auditing standards. III. There are clear signals that Anglo-American...
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...TB EXAM QUESTIONS Chapter 1 True False 1.Napoleon found the Italian system of accounting to be inefficient. 2.Venice’s commerce was driven by sea traffic. 3.The Genoese system was the first to imply that unlike items could be compared in terms of a common monetary unit. 4.Double entry bookkeeping quickly had world-wide acceptance, as the British accepted it in the 1400s. 5.When hyperinflation exists, alternative systems to historical cost become necessary. 6. The International Accounting Standards Board, an international organization dedicated to the diversity of accounting standards worldwide. 7. One trend in European securities markets is consolidation. 8. The continental accounting system is closely linked to the tax collection system. 9. The first step into international business is usually the creation of a foreign subsidiary. 10. If a firm is not involved in international commercial transactions, knowledge of international business is unnecessary. Multiple Choice Learning Objective #1.1: Identify the key trends in the development of accounting through history 1. The Crusades were important in the development of accounting, because __a. the Arabs first developed double entry accounting, which was then adopted by the Italians. __b. the Christians needed double entry accounting to keep track of the relative profitability of the different Crusades. __c. the trade routes shifted the commercial center from Italy to Constantinople ...
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