...assertions tie into generally accepted accounting principles in that those assertions are also embodied in GAAP. The five main assertions are defined as: Existence/occurrence. The assets, liabilities, and equity interests exist and all transactions reflected in the financial statements actually occurred. Completeness. All assets, liabilities, equity interests, and transactions that should have been recorded have been recorded, i.e., nothing is left out of the financial statements. Rights/obligations. The entity holds or controls the legal ownership to assets, and liabilities are legally owed by the entity. Valuation/allocation. Assets, liabilities, and equity interests are included in the financial statements at appropriate amounts and any resulting valuation or allocation adjustments are appropriately recorded. Presentation/disclosure. Assets, liabilities, and equity interests are appropriately classified on the financial statements, and are adequately described in the footnotes to the financial statements. 7-4. Valuation is usually one of the most important assertions to address in most audits. The intent of this question is to have the students think about the detail required by GAAP in forming specific assertions to be...
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...Table of Contents 1(a) What is Earnings Management? 2 (b) How do companies manage earnings? 3 (c) What are the means of detecting earnings management? 6 * Aggregate accruals/ Discretionary accruals 6 * Specific accrual 7 * Earnings distribution 8 2(a) Why do companies fail? (Causes of company failures) 9 * The Main Causes Of Business/ Company Failures 9 * The Solutions 10 (b) Comment on 6 corporate failure models, discussing their relative advantages anddisadvantages 11 Quantitative models: * Beaver 11 * Altman 12 * Taffler and Tishaw Model based on Z sore 14 * ZETA and Performance Analysis Score by Altman and Taffler 14 * H Score 15 Quantitative Models: * Argenti Model- A Score 15 References......................................................................................................................................18 1(a) What is Earnings Management? Earnings management, often referred to as creative accounting, is a pressing practice which is still getting more and more widespread nowadays. But to understand what earnings management is, it is important to realize what we mean when we refer to earnings. Sometimes called the “bottom line” or “net income”, earnings are referred to as the single most important item in financial statements. They are in fact the profits of a company. They indicate the extent to which a company has engaged in value-added activities. They are a signal that helps direct...
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...excess returns has come an increased focus on measuring and forecasting returns earned by businesses on both investments made in the past and expected future investments. In this paper, we examine accounting and cash flow measures of these returns and how best to forecast these numbers for any given business for the future. 3 The notion that the value of a business is a function of its expected cash flows is deeply engrained in finance. To generate these cashflows, though, firms have to raise and invest capital in assets and this capital is not costless. In fact, it is only to the extent that the cash flows exceed the costs of raising capital from both debt and equity that they create value for a business. In effect, the value of a business can be simply stated as a function of the “excess returns” that it generates from both existing and new investments. While this principle is intuitive and easily proved, measuring excess returns has proved to be difficult to do. On one side of the equation are the costs of debt, equity and capital. While there are clearly significant questions that remain to be addressed, a significant portion of the research in finance has been...
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...PREDICTING FINANCIAL DISTRESS OF COMPANIES: REVISITING THE Z-SCORE AND ZETA® MODELS Edward I. Altman* July 2000 *Max L. Heine Professor of Finance, Stern School of Business, New York University. This paper is adapted and updated from E. Altman, “Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy,” Journal of Finance, September 1968; and E. Altman, R. Haldeman and P. Narayanan, “Zeta Analysis: A New Model to Identify Bankruptcy Risk of Corporations,” Journal of Banking & Finance, 1, 1977. Predicting Financial Distress of Companies: Revisiting the Z-Score and ZETA® Models Background This paper discusses two of the venerable models for assessing the distress of industrial corporations. These are the so-called Z-Score model (1968) and ZETA® 1977) credit risk model. Both models are still being used by practitioners throughout the world. The latter is a proprietary model for subscribers to ZETA Services, Inc. (Hoboken, NJ). The purpose of this summary are two-fold. First, those unique characteristics of business failures are examined in order to specify and quantify the variables which are effective indicators and predictors of corporate distress. By doing so, I hope to highlight the analytic as well as the practical value inherent in the use of financial ratios. Specifically, a set of financial and economic ratios will be analyzed in a corporate distress prediction context using a multiple discriminant statistical methodology. Through...
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...intended users in the financial statements by the expression of an opinion by the auditor Overall Objectives of the Auditor: * To obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, thereby enabling the auditor to express an opinion on whether the financial statements are prepared, in all material aspects, in accordance with an applicable financial reporting framework * To report on the financial statements and communicate in accordance with the auditor’s findings Audit Process Overview: * Step 1: Client Acceptance and Retention * Step 2: Risk Assessment (Through understanding client business environment and operations Assess risks of material misstatement Assess Audit Risk) * Step 3: Audit Procedures Planning * Step 4: Test of controls (IF reliance on controls) * Step 5: Perform substantive tests * Step 6: Audit Completion and Reporting Financial Statement Assertions: * Assertions are representations made by management, explicit or otherwise, that are embodied in F/S, as used by auditor to consider the different types of potential misstatements that may occur * Focus on assertions as: * Different risks result in different risks of misstatements affect different assertions (transactions and account balances can be misstated in different ways with different assertions being affected, eg. Fictitious credit sales Occurrence) * Depending...
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...The Framework of FRS F.R.A SS7 Two systems worldwide R22: Financial Statement Analysis: An Introduction R23: Financial Reporting Mechanics R24: Financial Reporting Standards The Financial Accounting Standards Board (FASB) The Statement of Financial Accounting Standards (SFAS) R25: Understanding the I/S R26:Understanding the B/S R27: Understanding the C/F R28: Financial Analysis Techniques R29: Inventories R30: Long-Lived Assets R31: Income Taxes R32: Long-Term Liabilities and Leases U.S. GAAP SS9 SS8 Generally Accepted Accounting Principle The International Accounting Standards Board (IASB) The International Accounting Standards (IAS) The International Financial Reporting Standards (IFRS) SS10 Recognition R33: Financial Reporting Quality R34: Financial Statement Analysis: Applications Measurement IFRS Disclosure Financial analysis 3-375 4-375 Framework Financial reporting & analysis 1. The role of financial reporting and financial statement analysis The role of financial reporting The International Accounting Standards Board (IASB) definition: 2. The resources used for financial statement analysis Financial reporting refers to the way companies show their financial performance to investors, creditors, and other interested parties by preparing and presenting financial statements. Key financial statements Other relevant information The objective of financial statements is to...
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...a Solutions for Chapter 4 Audit Risk, Business Risk, and Audit Planning Review Questions: 4-1. Business Risk - Those risks that affect the operations and potential outcomes of organizational activities. Engagement Risk - The risk auditors encounter by being associated with a particular client: loss of reputation, inability of the client to pay the auditor, or financial loss because management is not honest and inhibits the audit process. Financial Reporting Risk - Those risks that relate directly to the recording of transactions and the presentation of financial data in an organization’s financial statements; also referred to as the risk of material misstatement. Audit Risk - The risk that the auditor may provide an unqualified opinion on financial statements that are materially misstated. 2. Business risk management is defined as: “Process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.” (COSO, 2004) The organization itself bears the responsibility for effective implementation of ERM. It is important for all organizations to implement an effective ERM so that risks are understood and properly controlled by members of the organization, particularly...
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...CHAPTER 4 Engagement Planning LEARNING OBJECTIVES | Review Checkpoints | Exercises, Problems and Simulations | 1. List and describe the activities auditors undertake before beginning an engagement. | 1, 2, 3, 4 | 53, 54, 55, 62, 66 | 2. Identify the procedures and sources of information auditors can use to obtain knowledge of a client’s business and industry. | 5, 6, 7, 8, 9 | 52, 56, 59, 65 | 3. Perform analytical procedures to identify potential problems. | 10, 11, 12, 13, 14, 15 | 47, 48, 49, 51, 58, 63, 64 | 4. List and discuss matters of planning auditors should consider for clients who use computers and describe how a computer can be used as an audit tool. | 16, 17, 18, 19, 20, 21, 22 | 57, 60 | 5. Review audit documentation for proper form and content. | 23, 24, 25 | 50, 61 | SOLUTIONS FOR REVIEW CHECKPOINTS 4.1 A CPA can use the following sources of information to help decide whether to accept a new audit client. Financial information prepared by the prospective client: * Annual reports to shareholders * Interim financial statements * Securities registration statements * Annual report on SEC Form 10K * Reports to regulatory agencies Inquiries directed to the prospect's business associates: * Banker * Legal counsel * Underwriter * Other persons, e...
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...after the spin-off of most of its non-warehouse assets to Price Enterprises, Inc., the Company changed its name to Costco Companies, Inc. On August 30, 1999, the Company reincorporated from Delaware to Washington and changed its name to Costco Wholesale Corporation, which trades on the NASDAQ under the symbol “COST.” As of December 2010, the Company operated a chain of 582 warehouses in 40 states and Puerto Rico (425 locations), nine Canadian provinces (80 locations), the United Kingdom (22 locations), Korea (seven locations), Taiwan (six locations, through a 55%-owned subsidiary), Japan (nine locations) and Australia (one location), as well as 32 warehouses in Mexico through a 50%-owned joint venture. CONTENTS Financial Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Letter to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Map of Warehouse Locations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Properties: Warehouses, Administration...
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...Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NO. 001-32876 WYNDHAM WORLDWIDE CORPORATION (Exact name of registrant as specified in its charter) 20-0052541 (I.R.S. Employer DELAWARE (State or other jurisdiction of incorporation or organization) Identification No.) 22 SYLVAN WAY 07054 PARSIPPANY, NEW JERSEY (Zip Code) (Address of principal executive offices) (973) 753-6000 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each Class on which registered Common Stock, Par Value $0.01 per share New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. No ¨ No Yes ¨ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by...
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...London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City Sao Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editor in Chief: Donna Battista Acquisitions Editor: Stephanie Wall Editorial Project Manager: Christina Rumbaugh Senior Managing Editor: Cynthia Zonneveld Production Project Manager: Carol O'Rourke Senior Operations Supervisor: Diane Peirano Printer/Binder: BindRite Graphics, Robbinsville Credits and acknowledgments borrowed from other sources and reproduced, with permission, in this textbook appear on the appropriate page within text. Copyright © 2012, 2009, 2006, 2003, 2000 by Pearson Education, Inc., publishing Prentice Hall. All rights reserved. Manufactured in the United States of America. This publication is protected by Copyright, and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. To obtain permission(s) to use material from this work, please submit a written request to Pearson Education, Inc., Permissions Department, One Lake Street, Upper Saddle River, New Jersey 07458, or you may fax your request to 201-236-3290. Many of the designations by manufacturers and sellers to distinguish their products are claimed as trademarks. Where those designations appear in this book, and the publisher was aware of a trademark claim, the designations have been printed in initial caps or...
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...SECOND EDITION I/1ANAGEMEIVT AND POLICY James C.Van Horne \ STANFORD UNIVERSITY PRENTICE-HALL INC., ENGLEWOOD CLIFFS, NEW JERSEY F I NANCI AL M A N A G E M E N T A N D POLICY, 2nd EDITION James C. Van Horne © 1971, 1968 by PRENTICE-HALL, INC., ENGLEW O O D CLIFFS, N.J. All rights reserved. No part of this book m ay be reproduced in any form or by any m eans without permission in writing from the publishers. Library of Congress C atalo g C ard No.: 71-140760 Printed in the United States of America Current Printing (last digit): 1 0 9 8 7 6 5 4 3 2 13-315309-6 PRENTICE-HALL, INTERNATIONAL, LONDON PRENTICE-HALL OF AUSTRALIA PTY. LTD., SYD NEY PRENTICE-HALL O F CAN AD A, LTD., TO RONTO PRENTICE-HALL OF INDIA PRIVATE LTD., NEW DELHI PRENTICE-HALL OF JAPAN, INC., TO KYO 1 To Mimi, D rew , Stuart, and Stephen Preface Though significant portions of Financial Management and Policy have been changed in this revision, its purpose remains: first, to develop an understanding of financial theory in an organized manner so that the reader may evaluate the firm’s investment, financing, and dividend deci sions in keeping with an objective of maximizing shareholder wealth; second, to become familiar with the application of analytical techniques to a number o f areas o f financial decision-making; and third, to expose the reader to the institutional material necessary to give him a feel for the environment in which financial...
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...framework. Understand the objective of financial reporting. Identify the qualitative characteristics of accounting information. Define the basic elements of financial statements. •6 •7 Describe the basic assumptions of accounting. Explain the application of the basic principles of accounting. Describe the impact that constraints have on reporting accounting information. •8 •5 What Is It? Everyone agrees that accounting needs a framework—a conceptual framework, so to speak—that will help guide the development of standards. To understand the importance of developing this framework, let’s see how you would respond in the following two situations. SITUATION 1: “Taking a Long Shot . . . ” To supplement donations collected from its general community solicitation, Tri-Cities United Charities holds an Annual Lottery Sweepstakes. In this year’s sweepstakes, United Charities is offering a grand prize of $1,000,000 to a single winning ticket holder. A total of 10,000 tickets have been printed, and United Charities plans to sell all the tickets at a price of $150 each. Since its inception, the Sweepstakes has attracted area-wide interest, and United Charities has always been able to meet its sales target. However, in the unlikely event that it might fail to sell a sufficient number of tickets to cover the grand prize, United Charities has reserved the right to cancel the Sweepstakes and to refund the price of the tickets to holders. In recent years, a fairly active secondary...
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...ACKNOWLEDGEMENT We gratefully acknowledge permission to quote from the past examination papers of the following bodies: Kenya Accountants and Secretaries National Examination Board (KASNEB); Chartered Institute of Management Accountants (CIMA); Association of Chartered Certified Accountants (ACCA). We also wish to express our sincere gratitude and deep appreciation to Mr. Geoffrey Ngene MBA, B.COM (Finance), CPA (finalist), CFA (East Africa). He is a senior lecturer at Strathmore University, School of Accountancy. He has generously given his time and expertise and skilfully co-ordinated the detailed effort of reviewing this study pack. INSTRUCTION FOR STUDENTS This study guide is intended to assist distance-learning students in their independent studies. In addition, it is only for the personal use of the purchaser, see copyright clause. The course has been broken down into eight lessons each of which should be considered as approximately one week of study for a full time student. Solve the reinforcement problems verifying your answer with the suggested solution contained at the back of the distance learning pack. When the lesson is completed, repeat the same procedure for each of the following lessons. At the end of lessons 2, 4, 6 and 8 there is a comprehensive assignment that you should complete and submit for marking to the distance learning administrator. Submission Procedure 1. After you have completed a comprehensive assignment clearly identify...
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...A GUIDE TO FORENSIC ACCOUNTING INVESTIGATION THOMAS W. GOLDEN, STEVEN L. SKALAK, AND MONA M. CLAYTON JOHN WILEY & SONS, INC. A GUIDE TO FORENSIC ACCOUNTING INVESTIGATION THOMAS W. GOLDEN, STEVEN L. SKALAK, AND MONA M. CLAYTON JOHN WILEY & SONS, INC. This book is printed on acid-free paper. Copyright © 2006 by PricewaterhouseCoopers LLP. PricewaterhouseCoopers refers to the individual member firms of the worldwide PricewaterhouseCoopers organization. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400, fax 978-646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, 201-748-6011, fax 201-748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this...
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