...Chapter 6 Property and Equipment and Other Assets Overview 6.01 Health care entities use various kinds of property and equipment. Those assets are generally significant to the financial position of institutional health care entities, such as hospitals and nursing homes. Typical accounts used to record property and equipment transactions are land, land improvements, buildings and improvements, leasehold improvements, equipment (fixed and movable), leased property and equipment, accumulated depreciation and amortization, and construction in progress. Health care entities also have intangible assets, which may be acquired in connection with business combinations or purchases, or developed from other resources of the entity. Intangibles with finite lives are amortized according to their useful life. Examples of intangibles include: Health Plans customer relationships, such as employer groups or members provider networks trademarks trade names software licenses favorable leases non-compete agreements goodwill Hospitals and other health care facilities licenses certificates of need managed care contracts goodwill Physician practices medical charts non-compete agreements managed care contracts goodwill 6.02 6.03 Supplies inventories are generally not very significant to the financial position of health care entities. However, because of the volume and cost of supplies used, they may be much more significant to operating expenses and the statement of operations. Supplies typically...
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...issues or other noteworthy circumstances related to engagements addressed by the AASB pronouncements. It is also meant to direct practitioners to relevant requirements, application and other explanatory material in the CICA Handbook – Assurance. auditing and assurance FOR PUBLIC ACCOUNTANTS PERFORMING AUDIT AND REVIEW ENGAGEMENTS BULLETIN Staff contact Chi Ho Ng, CA, CPA(IL), MBA Principal Auditing and Assurance Standards Department 277 Wellington Street West Toronto, ON M5V 3H2 Tel: (416) 204-3443 E-mail: chiho.ng@cica.ca Fax : (416) 204-3408 Auditing Considerations in an Uncertain Economic Environment Uncertainties in the current economic environment There is a possibility that the Canadian economy may weaken in the near term. This has been noted in various sources, including the economic forecast for Canada issued by the Organization for Economic Co-operation and Development. Heightened risks from renewed financial-market turmoil linked to the European sovereign debt crisis and high levels of household indebtedness are eroding consumer confidence. In January 2009, staff of the Auditing and Assurance Standards Board (AASB) issued a Risk Alert, “Auditing Considerations in the Current Economic Environment,” to highlight matters for auditors to consider when responding to higher risks of material misstatements of financial statements of entities significantly affected by the 2007/2008 downturn in the Canadian economy. This Bulletin updates the January 2009 Risk Alert...
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...ancillary parts. In its Form 10-K, filed with the SEC, the following information was disclosed. First, on the basis of assumptions underlying the acceleration of the Company’s strategy refocus, management projects a decline in the net cash flows for the A2 Americas segment. As a result, in the third quarter of 2010, management has tested the long-lived assets of this segment for recoverability. They recorded a pretax impairment charge of $1.76 billion in cost of sales. Secondly, during the third quarter of 2010, management also reviewed their business plan for the Alpha and Beta operating units. These units projected lower sales, a decline in net cash flows, and currency exchange deterioration. As a result, they tested the long-lived assets of these units for recoverability and recorded a pretax impairment loss of $1.28 billion. Lastly, during 2009, management updated their Asia Pacific Improvement Plan for the Alpha and Beta operating units. They projected a decline in net cash flows for these units based on market projections that reflected the recent market performance for Alpha. As a result, management tested the long-lived assets for impairment and recorded a pretax impairment charge of $1.04 billion. After this 10-K was filed with the SEC, the SEC responded to the Company and required them to explain the inconsistencies of this reporting. The SEC noted that the Company had determined the appropriate amount of impairment for the A2 Americas segment for the Americas...
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...Auto Corporation Date: March 31, 2010 Prepared by: Joe Expert Senior Reviewed by: Manager XWZ CPA Adam Smith ISSUE: Grouping of long-lived assets to be held and used for impairment testing purposes. BRIEF BACKGROUND OF HISTORY A2 Auto Corporation (“A2 Auto”) is one of the world’s largest manufacturers and distributors of automobiles and automobile ancillary parts. In its Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”), A2 Auto has disclosed within Note 24, Segment Information, that it has four operating segments: (1) A2 Americas, (2) A2 Asia Pacific, (3) A2 Others, and (4) Financial Services. Note 12, Goodwill and Other Intangibles, disclose that A2 Auto has the same four reporting units. ACCOUNTING QUESTIONS 1. What are the appropriate criteria for the grouping of long-lived assets to be held and used for impairment testing purposes? 2. On the basis of the information in A2 Auto’s 2010 Form 10-K, what is the appropriate grouping for purposes of recognizing and measuring an impairment loss? 3. What audit considerations should be made when testing the appropriate grouping of long-lived assets for purposes of recognition and measurement of an impairment loss? 4. Is A2 Auto’s approach for testing goodwill for impairment after recognizing an impairment charge related to a long-lived asset group classified as held-and-used appropriate? 5. After the A2 Americas $1.76 billion impairment loss was recognized, strategy refocus...
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...for Idle Plant Assets Victoria Dickinson, Paul Kimmel, and Terry Warfield ABSTRACT: Bioscience Company and its auditors have been in discussions with the SEC concerning the accounting for its long-lived assets. Among the issues being discussed is the company’s discontinuation of depreciation on productive assets that it had used previously, but it was not currently using. The case permits a technical examination of depreciation and impairment accounting issues with consideration of the FASB’s asset/liability measurement approach, fair value accounting, use of the FASB Codification, and comparisons to International Financial Reporting Standards. The case requirements are divided into basic requirements, which would be appropriate for intermediate level students; and advanced requirements, which would be more appropriate for accounting seniors, as well as M.B.A. and fifth-year accounting students. Keywords: accounting for long-lived assets; depreciation; impairment. INTRODUCTION ristin Murphy recently joined the audit team of one of the more interesting clients in her accounting firm’s practice. An important issue has arisen for this client on a topic that she has not encountered in her four years with the firm. Following is some background on the client and the accounting issue under consideration. K BIOSCIENCE COMPANY Bioscience Company, founded in 1985, began when a defense and aerospace contractor assigned a few scientists to study the use of algae in long-term space flight...
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...financial statements and other stakeholders asked for comparisons of financial statements prepared under the framework to those prepared under U.S. GAAP. These are presented for comparative purposes. These sample financial statements are included for illustrative purposes and are not intended to establish reporting requirements. Furthermore, the dollar amounts shown are illustrative only and are not intended to indicate any customary relationship among accounts. The sample financial statements do not include all of the accounts and transactions that might be found in practice. The notes indicate the subject matter generally required to be disclosed, but should be expanded, reduced, or modified to suit individual circumstances and materiality considerations. In the following illustrative financial statements based on the FRF for SMEs accounting framework, it is presumed that the management of Alpha Contractors Inc. and subsidiary evaluated the financial reporting needs and responsibilities of their businesses and determined that the FRF for SMEs accounting framework was a suitable accounting option to use in the preparation of their financial statements. d /W d , &Z& , E d ^D E , z Alpha Contractors, Inc. and Subsidiary Comparative Financial Statements December 31, 2013 and 2012 Based on the FRF for...
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...due. If Paul penalty would have been 0.5% the amount owed would be $7,866.60 {$5,619 + $2247.60 (5,619*0.05*8)} or could be up to a maximum of $16,857 {$5,619 + $11,238 (5,619*0.25*8)}. Also the IRS could impose an interest charge per day of 3%, as of the last interest table (interest change every 3 month). As for problem 1-47 the IRS can audit Dan tax return but they have to meet certain criteria. The IRS has a 3 year statute of limitation but there are 3 exceptions to that limitation: * The IRS has six years from the date a return is filed to audit a tax return and to assess additional tax if the taxpayer omits income that amounts to more than 25% of income that was reported on the tax return. * The IRS also has six years to audit a tax return and assess additional tax on income related to undisclosed foreign financial assets if the omitted income is more than $5,000. * The statute of limitations on audits and assessing additional tax remains open indefinitely if the taxpayer files a false or fraudulent tax return. Therefore the IRS can audit Dan 2010 tax return because it falls within the 3 year limitation. The IRS can also audit Dan 2008 because he failed to report $40,00 of income and that is more than 25% of his income in 2008( income of $60000*.25= $15,000) as for the 2003 tax return...
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...Below are the potential problems/issues that the CPA firm might encounter in this audit with Lakeside Company, in order from one to seven, with one being the most important to the audit: 1. There appears to be a going concern for the industry that the Lakeside company is in. In 2005, Lakeside was in trouble, but has somewhat made a turnaround in 2010 and 2011; however, there are companies similar to Lakeside that are still going out of business. Within the last six months, and audio equipment company within the Richmond area went bankrupt. Also, while Roger’s distributorship business is growing, it seems that the remainder of his business is stagnant. In addition, it appears that Rogers has strayed from his original retail store operation into a new product market that may not be strong enough to support. With a failed product line in connecting with a weak market and continuous expansion on the basis of debt, this is a concern for the audit as an entity’s ability to remain a going concern and the potential for management fraud to inflate earnings and growth. 2. Rogers’ refusal to comply with his previous auditors request to report the companies sixth store with a write down in value to assess impairment, because Rogers believed no impairment existed. This argument led to the issue of a qualified opinion. The sixth store is located in an unsuccessful shopping center and has been underperforming. The company has not even come close to breaking-even and the failures of...
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...Summary of Internal Control Definition Chapter 07 Internal Control A process, effected by the entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding, achievement of (the entity’s) objectives on: Effectiveness and efficiency of operations Reliability of financial reporting Compliance with applicable laws and regulations McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. 7-2 Control Objectives In each area of internal control (financial reporting, operations and compliance) Control objectives and Sub objectives exist Foreign Corrupt Practices Act Passed in 1977 in response to American corporation practice of paying bribes and kickbacks to officials in foreign countries to obtain business The Act Requires an effective system of internal control Makes illegal payment of bribes to foreign officials Example: Area of financial reporting Top level objective – prepare and issue reliable financial information Detailed level applied to A/R sub objectives • All goods shipped are accurately billed in the proper period • Invoices are accurately recorded for all authorized shipments and only for such shipments • Authorized and only authorized sales returns and allowances are accurately recorded • The continued completeness and accuracy of A/R is ensured • Accounts receivable records are safeguarded 7-3 7-4 Controls over Financial Reporting Preventive Aimed...
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...operating segments: (1) A2 Americas, (2) A2 Asia Pacific, (3) A2 Others, and (4) Financial Services. Note 12, Goodwill and Other Intangibles, discloses that A2 Auto has the same four reporting units. The following is disclosed within Note 11, Impairment of Long-Lived Assets, of A2 Auto’s 2010 Form 10-K: 1. On the basis of the assumptions underlying the acceleration of our strategy refocus, we project a decline in net cash flows for the A2 Americas segment, primarily reflecting lower market share assumptions, capacity reductions, and other aspects of our accelerated plan. As a result, in the third quarter of 2010, we tested the long-lived assets of this segment for recoverability and recorded a pretax impairment charge of $1.76 billion in automotive cost of sales, representing the amount by which the carrying value of these assets exceeded their fair value. 2. During the third quarter of 2010, we also reviewed our business plan for the Alpha and Beta operating units within our Asia Pacific segment and, consistent with 2010 operating results, projected lower sales, a decline in net cash flows for these operating units based on cost performance shortfalls, and currency exchange deterioration. As a result, we tested the long-lived assets of these operating units for recoverability and...
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...Management Representations 1941 AU Section 333 Management Representations (Supersedes SAS No. 19.) Source: SAS No. 85; SAS No. 89; SAS No. 99; SAS No. 113. See section 9333 for interpretations of this section. Effective for audits of financial statements for periods ending on or after June 30, 1998, unless otherwise indicated. Introduction .01 This section establishes a requirement that the independent auditor obtain written representations from management as a part of an audit of financial statements performed in accordance with generally accepted auditing standards and provides guidance concerning the representations to be obtained. Reliance on Management Representations .02 During an audit, management makes many representations to the auditor, both oral and written, in response to specific inquiries or through the financial statements. Such representations from management are part of the audit evidence the independent auditor obtains, but they are not a substitute for the application of those auditing procedures necessary to afford a reasonable basis for an opinion regarding the financial statements under audit. Written representations from management ordinarily confirm representations explicitly or implicitly given to the auditor, indicate and document the continuing appropriateness of such representations, and reduce the possibility of misunderstanding concerning the matters that are the subject of the representations. [Revised, March 2006, to reflect conforming...
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...Deloitte United States Services Audit & Enterprise Risk Services Consulting Financial Advisory Services Tax Deloitte Growth Enterprise Services Featured Services Industries 2014 Industry Outlook Aerospace & Defense Automotive Banking & Securities Consumer Products Federal Government Health Care Providers Health Plans Insurance Investment Management Life Sciences Media & Entertainment Oil & Gas Power & Utilities Process & Industrial Products Real Estate Retail & Distribution State Government Technology Telecom Travel, Hospitality & Leisure Insights Deloitte University Press Browse by Content Type Browse by Role Innovation Centers Email Subscriptions Careers About Press Events Alumni Clients Contact Global > United States > About > University Relations > Deloitte Foundation Global site selector Go Search Search Top searches Top searchesBookmark Email Print this page Increase font Alliances Catalyst for Innovation Community Involvement Corporate Responsibility Deloitte’s sponsorship of the U.S. Olympic Committee Inclusion Deloitte University Ethics & Independence Deloitte Life Growth Through Acquisition History Investor Confidence Leadership University Relations Deloitte Foundation Faculty Resources Faculty and Ph.D. Support Life, Inc. Student Events The Trueblood Case Studies DOWNLOAD For a complete index of Cases and Addendum summary please click the download button above. The Trueblood Series cases...
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...Table of Contents Executive Summary ------------------------------------------------------------------------- page 1 Wireless Telecommunication Industry -------------------------------------------------- page 2 Leap Wireless International, Inc. -------------------------------------------------------- page 3 Verizon Communication, Inc. ------------------------------------------------------------ page 4 Restatement of Leap Wireless ------------------------------------------------------------ page 4 Analysis in Accounting Policies and Disclosure Practices --------------------------- page 6 Comparative Analysis of the Financial Statements ------------------------------------ page 8 Governance Structures --------------------------------------------------------------------- page 11 Conclusion ----------------------------------------------------------------------------------- page 14 Reference ------------------------------------------------------------------------------------ page 15 Additional Information -------------------------------------------------------------------- page 17 Executive Summary At least 90% people in the United States use at least one kind of wireless telecommunication services, such as cellular networks service. Leap Wireless International, Inc. is the 5th largest United States public telecommunications company. It competitors include AT&T, T-Mobile or Verizon. This paper will be mainly focused on the restatement of Leap’s restatement of financial...
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...largest airfreight companies in Malaysia. The company was registered as an investment holding company with several subsidiaries, for which their principal activities ranging from air freight services to ground handling services. FCB was the only dedicated Intra-Asian overnight express cargo operator based in Malaysia and had exclusive excess to an international cargo complex at Sultan Abdul Aziz Shah Airport in Subang. Furthermore, as it has successfully secured the landing rights in Asia Pacific regions, FCB was in ideal niche position to serve the international integrators, freight forwarders, and major airlines within Asian region. However, as highlighted in this case, the auditors had identified several suspicious findings in a financial audit engagement. In 2006, Mr. Chuah, an auditor from Kencana & Associate s had noticed some irregularities of accounting records in FCB, which may possibly be another fraud case after Media Com and Blue Vital. These irregularities could be created intentionally or merely just an accounting error....
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...the textbook Contemporary Auditing: Real Issues and Cases and answer the questions as listed at the end of the case study. I decided to select case 1.10 United States Surgical Corporation. Comprehensive Case United States Surgical Corporation 3 Comprehensive Case United States Surgical Corporation To fully appreciate this paper it is recommended that the case study along with the associated questions be read prior to reading this paper. Question one from the case study focuses on what audit procedures should have been performed by the auditing firm for the 1981 audit period that would help increase the possibility of detecting the overstatement of the leased and loaned assets due to the fact that United States Surgical Corporation did not properly account for asset retirements. In every organization or institution, standards that were developed by regulatory bodies have to be adhered to. Standards [result] in the formulation of proper principles and procedures to be followed including audit plans, measurable objectives and performance targets to ensure that the...
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