...Summary Nick O’Brian is a recent college graduate. He began working in the accounting department at his aunt’s software company, O’Brian Software. Nick is going over the financial statements when he recognizes some questionable revenue recognition issues. Nick proceeds to address his concerns with the chief financial officer of the company, Lee Marchetti. Lee explains to Nick how revenue recognition is broken down and that a lot of information and judgment is involved. It is also pointed out that since the company went public three years ago they have consistently received ‘clean’ opinions from external auditors. Nick admits that Marchetti strikes him as a honest man with years of experience. Out of concern for his aunt’s company he approached his aunt, who is not known for her accounting expertise, but is the CEO of O’Brian Software. After explaining his concerns she asked Nick whether or not they should present this information to the audit committee. Issues/Questions The initial question is whether or not the audit committee should be made aware of Nick’s revenue recognition concerns. As President and CEO of Softrax Corporation, Robert O’Connor, points out, this is a serious claim. It is imperative that Nick does his research before making such a claim. The underlying issue in this case is if O’Brian Software is creating ‘cookie jar’ reserves by understating profits in periods of prosperity and then creating false reserves in times the company needs a boost. The...
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...Michael Dobe Jr. Bernie Ebbers(left) 5340–Ethics CEO Timothy McCoy 4/6/2015 Scott Sullivan(right) CFO&CPA 1. Two General Accounting employees-Dan Renfroe and Angela Walter-made journal entries in the amount of $150 million and $771 million, respectively, without detailed support. It was noted that this was not out of the ordinary at WorldCom. In your opinion, was this a proper accounting practice? Explain. Normally at the end of each month, Worldcom would estimate the costs of using “Off-net” facilities and connections. Worldcom would accrue these liability estimates. Line cost accrual estimates were very difficult to estimate with precision, especially for international services. When Worldcom learned more about the applicable charges of these Off-net services-when evidence was available-adjusting entries were made to correct the original estimates. As economic conditions worsened, the search for cost savings by Ebbers and Sullivan sparked the abuse of these release of accruals. Apparently Sullivan directed a $150 accrual release without any detailed supporting evidence to do so. This shows the desperate nature of the attempts to restore Line E/R raios. Then again Walter made another large adjusting entry without detailed support. Just because it is not out of the ordinary, does not make it a just practice in accordance with GAAP. In my opinion the $150 accrual release was completely unjustified because it lacked...
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...Brothers: In its last reported financial statements before it went bankrupt, Lehman Brothers reported a loss of $US 2.4 billion for the first six months ended May 31, 2008 (vs. a net income of $US 2.4 billion for the first six months ended May 31, 2007). The shift of $US 4.8 billion in net income is largely driven by a dramatic fall of $US 8.5 billion in Lehman’s revenues from principal transactions, which include realized and unrealized gains or losses from financial instruments and other inventory positions owned. A significant portion of the downward shift in principal transactions revenues is actually explained by unrealized losses of $US 1.6 billion in the first semester of 2008 vs. unrealized gains of $US 200 million in the first semester of 2007. Thus, accounting at fair value for some financial assets amplified Lehman's downward earnings performance. Hence, it can be put forward that FVA, through its magnifying impact on earnings volatility, may have contributed to aggravate investors', regulators' and governments' perceptions with respect to the severity of the crisis, itself characterized by record volatility in the prices of many securities and goods. On a related note, the increased volatility brought forward by FVA is conducive to the use of equity-based compensation, especially stock options, which value is then enhanced (according to the Black-Scholes model, volatility is one of the key inputs in option valuation). Prior research 此前的研究 suggests that there is a strong...
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...Growing Pains at Groupon As an undergraduate music major at Northwestern University, Andrew Mason eagerly sought a version of rock music that would fuse punk with the Beatles and Cat Stevens. Little did he imagine that within ten years he would be the CEO of one of history’s fastest growing businesses. After Northwestern and faded dreams of rock stardom, Mason, a self-taught computer programmer, was hired to write code by the Chicago firm InnerWorkings. InnerWorkings was founded in 2001 by Eric Lefkofsky who had built several businesses around call centers and the Internet. In 2006, Lefkofsky became interested in an idea of Mason’s for a website that would act as a social media platform to bring people together with a common interest in some problem—most often some sort of social cause. Lefkofsky provided Mason with $1 million of capital to develop the concept that became known as “The Point.” Virtually no one associated with The Point initially envisioned commercial aspirations for the venture. In the fall of 2008, at the height of financial crisis, ventures with little or no commercial aspirations were in jeopardy. Lefkofsky and Mason faced a decision on how to proceed with The Point. Lefkofsky seized on an idea proposed by a group of users on The Point. This group attempted to identify a number of people who wanted to buy the same product, and then approach a seller for a group discount. Mason had originally mentioned group-buying as one application of The Point, and...
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...© 2000 American Accounting Association Accounting Horizons Vol. 14 No. 2 June 2000 pp. 235-250 Earnings Management: Reconciling the Views of Accounting Academics, Practitioners, and Regulators Patricia M. Dechow and Douglas J. Skinner Patricia M. Dechow is an Associate Professor and Douglas J. Skinner is a Professor, both at the University of Michigan. SYNOPSIS: We address the fact that accounting academics often have very different perceptions of earnings management than do practitioners and reguiators. Practitioners and reguiators often see earnings management as pervasive and probiematic—and in need of immediate remediai action. Academics are more sanguine, unwiiiing to beiieve that earnings management is activeiy practiced by most firms or that the earnings management that does exist should necessarily concern investors. We explore the reasons for these different perceptions, and argue that each of these groups may benefit from some rethinking of their views about earnings management. INTRODUCTION Despite significant attention on earnings management from regulators' and the financial press,^ academic research has shown limited evidence of earnings management. While practitioners and regulators seem to believe that earnings management is For example, SEC Chairman Levitt delivered a major speech on earnings management in the fall of 1998 in which he advocated a niunber of initiatives to improve the quahty of financial reporting (Levitt 1998). As part...
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...ACTG 630 – Case Assignment Due: Wednesday, December 3 Please submit one assignment per group. No more than 3 students per group. Read “Growing Pains at Groupon” by Dutta, Caplan and Marcinko (2014) and complete the questions included in the Case Requirements section (beginning on page 238). Instructions for accessing the FASB Codification database: 1. Go to http://aaahq.org/ascLogin.cfm 2. User ID: AAA51526 3. Password: x43AYtX ISSUES IN ACCOUNTING EDUCATION Vol. 29, No. 1 2014 pp. 229–245 American Accounting Association DOI: 10.2308/iace-50595 Growing Pains at Groupon Saurav K. Dutta, Dennis H. Caplan, and David J. Marcinko GROWING PAINS AT GROUPON s an undergraduate music major at Northwestern University, Andrew Mason eagerly sought a version of rock music that would fuse punk with the Beatles and Cat Stevens. Little did he imagine that within ten years he would be the CEO of one of history’s fastestgrowing businesses. After Northwestern and faded dreams of rock stardom, Mason, a self-taught computer programmer, was hired to write code by the Chicago firm InnerWorkings. InnerWorkings was founded in 2001 by Eric Lefkofsky, who had built several businesses around call centers and the Internet. In 2006, Lefkofsky became interested in an idea of Mason’s for a website that would act as a social media platform to bring people together with a common interest in some problem— Saurav K. Dutta is an Associate Professor and Dennis H. Caplan is an Assistant Professor, both at University...
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...The North Face Inc. | | A Case Study | | | | | | Table of Contents CASE BRIEF 3 CASE ABSTRACT: 3 AUDITOR’S DILEMMA: 3 AUDITOR’S QUESTION: 3 Research Questions: 3 CASE CONTEXT 4 Understanding of the North Face Entity 4 Understanding of the Entity’s Environment 6 INDUSTRY CONDITIONS 6 INDUSTRY LIFE CYCLE: 8 The Apparel Commodity Chain: 9 Demand and Competition 9 Regulatory Environment: 10 Revenue Recognition 11 Other External Factors: 12 Answer to Questions 13 Figure 1- The Apparel Creation-to-Sales Cycle 7 Figure 2 - The Fraud Triangle 19 Table 1 - Rules for Revenue Recognition in Manufacturing Industry 11 CASE BRIEF CASE ABSTRACT: Financial accountants and independent auditors commonly face challenging technical and ethical dilemmas while carrying out their professional responsibilities. This case profiles an accounting and financial reporting fraud orchestrated by the chief financial officer (CFO) of a major public company and his subordinates. The CFO, who was a CPA, took extreme measures to conceal the fraud from his company’s audit committee and independent auditors. Despite those measures, the independent auditors identified suspicious entries in the company’s accounting records that were a result of the CFO’s fraudulent scheme but did not properly investigate those items. Shortly before the fraud was publicly revealed, a partner of the company’s audit firm instructed his subordinates to...
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...Applied Statistical Methods Larry Winner Department of Statistics University of Florida February 23, 2009 2 Contents 1 Introduction 1.1 Populations and Samples . . . . . . . . . . . 1.2 Types of Variables . . . . . . . . . . . . . . . 1.2.1 Quantitative vs Qualitative Variables 1.2.2 Dependent vs Independent Variables . 1.3 Parameters and Statistics . . . . . . . . . . . 1.4 Graphical Techniques . . . . . . . . . . . . . 1.5 Basic Probability . . . . . . . . . . . . . . . . 1.5.1 Diagnostic Tests . . . . . . . . . . . . 1.6 Exercises . . . . . . . . . . . . . . . . . . . . 7 7 8 8 9 10 12 16 20 21 25 25 29 29 29 32 32 32 32 32 35 35 37 38 38 39 40 42 42 44 48 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Random Variables and Probability Distributions 2.1 The Normal Distribution . . . . . . . . . . . . . . . . . . 2.1.1 Statistical Models . . . . . . . . . . . . . . . . . 2.2 Sampling Distributions and the Central Limit Theorem 2.2.1 Distribution of Y . . . . . . . . . . . . . . . . . . 2.3 Other Commonly Used Sampling Distributions . . . . . 2.3.1 Student’s...
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...SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 210, 229, 230, 240, 244 and 249 [RELEASE NOS. 33-8982; 34-58960; File No. S7-27-08] RIN 3235-AJ93 ROADMAP FOR THE POTENTIAL USE OF FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS BY U.S. ISSUERS AGENCY: Securities and Exchange Commission. ACTION: Proposed rule. SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing a Roadmap for the potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board by U.S. issuers for purposes of their filings with the Commission. This Roadmap sets forth several milestones that, if achieved, could lead to the required use of IFRS by U.S. issuers in 2014 if the Commission believes it to be in the public interest and for the protection of investors. This Roadmap also includes discussion of various areas of consideration for market participants related to the eventual use of IFRS in the United States. As part of the Roadmap, the Commission is proposing amendments to various regulations, rules and forms that would permit early use of IFRS by a limited number of U.S. issuers where this would enhance the comparability of financial information to investors. Only an issuer whose industry uses IFRS as the basis of financial reporting more than any other set of standards would be eligible to elect to use...
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...Introduction Indian Telecom Industry-Overview Indian telecom market is currently the most attractive telecom market with a lot of interest being shown by foreign players. Indian mobile industry is the fastest growing across the world adding 15-20 million new subscribers every month. The Indian telecommunication sector in India is the third largest sector across the globe and the second largest among the emerging economies of Asia. India's teledensity has improved from under 4% in March 2001 to around 71% by the end of March 2011. Cellular telephony has emerged as the fastest growing segment in the Indian telecom industry. The mobile subscriber base (GSM and CDMA combined) has grown from under 2 m at the end of FY00 to touch 812 m at the end of March 2011 (average annual growth of nearly 73% during this eleven year period). Fig1: India’s Wireless Subscriber base Circles | Number | in millions | Metros | 4 | 114 | A circles | 5 | 288 | B circles | 8 | 335.5 | C circles | 6 | 115 | The country was divided into 23 circles when the mobile phones were introduced in the country. Separate licenses were given out for each of the circles in 1994. The circles were classified as Metros, A, B or C depending upon the revenue potential for the circle with Metros & A...
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...European Journal of Accounting Auditing and Finance Research Vol.2. No.3, pp. 69-83, May 2014 Published by European Centre for Research Training and Development UK (www.ea-journals.org) A CRITIQUE ON CASH BASIS OF ACCOUNTING AND BUDGET IMPLEMENTATION IN NIGERIA Emmanuel Amaps Loveday Ibanichuka (Fca, Ph.D) Department of Accounting,Faculty of Management Science,University of Port-Harcourt, Port-Harcourt Oyadonghan Kereotu James (Aca) (Corresponding Author) Lecturer, Department of Accounting and Finance Niger Delta University, Wilberforce Island, P.M .B 071, Yenagoa, Bayelsa State, Nigeria ABSTRACT: In public sector accounting, government ministries and parastatals operate a cash basis of accounting which is believed to be simple in operation and understanding by staff that may not simply have a rigorous training in accounting. A great disadvantage is that it does not recognise assets, debtors and liabilities. This principle negligence is capable of introducing negligence into proper record keeping of how much value of infrastructural assets are being developed in the pass fiscal years, their state of activity and possibly resulting to a repetition of projects, poor monitoring of budget implementation and misappropriation of fund. The authors took a frank analysis of the implications as they relate to the consistent problem of poor budget implementation in Nigeria. This study was based on empirical analysis of one hundred and thirty (130) questionnaires...
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...SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 210, 229, 230, 240, 244 and 249 [RELEASE NOS. 33-8982; 34-58960; File No. S7-27-08] RIN 3235-AJ93 ROADMAP FOR THE POTENTIAL USE OF FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS BY U.S. ISSUERS AGENCY: ACTION: Securities and Exchange Commission. Proposed rule. SUMMARY: The Securities and Exchange Commission (“Commission”) is proposing a Roadmap for the potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board by U.S. issuers for purposes of their filings with the Commission. This Roadmap sets forth several milestones that, if achieved, could lead to the required use of IFRS by U.S. issuers in 2014 if the Commission believes it to be in the public interest and for the protection of investors. This Roadmap also includes discussion of various areas of consideration for market participants related to the eventual use of IFRS in the United States. As part of the Roadmap, the Commission is proposing amendments to various regulations, rules and forms that would permit early use of IFRS by a limited number of U.S. issuers where this would enhance the comparability of financial information to investors. Only an issuer whose industry uses IFRS as the basis of financial reporting more than any other set of standards would be eligible to elect to use IFRS, beginning with filings...
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...FA S B L E A R N I N G G U I D E For the Codification Research System Professional View March 1, 2012 Financial Accounting Standards Board of the Financial Accounting Foundation Acknowledgements Bruce Pounder, CMA, CFM, DipIFR (ACCA), was the lead contributor for the Lessons included in the FASB Learning Guide For the Codification Research System. Special thanks to Karen Guasp of the FASB, Mary Nassef of the FAF, and numerous other FASB and FAF staff members for their editorial contributions. Copyright © 2012 by Financial Accounting Foundation, Norwalk, Connecticut. All rights reserved. This publication is for informational purposes only and the content herein is not a substitute for legal, accounting or other professional advice. As such, users should not rely on this publication for instruction, opinions, guidance, advice, or strategies on the interpretation or application of accounting or accounting standards of the Financial Accounting Standard Boards, specifically or generally, and should always consult his or her own professional advisors and discuss the facts and circumstances that apply to the user. While every effort has been made to make the information presented here as complete and accurate as possible, it may contain errors, omissions or misinformation. Neither Financial Accounting Foundation nor the Financial Accounting Standard Boards accepts any liability or responsibility to any person or entity with respect to any loss or damage alleged to have...
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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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...Comparison between U.S. GAAP and International Financial Reporting Standards May 2013 © 2013 Grant Thornton LLP All rights reserved U.S. member firm of Grant Thornton International Ltd Comparison between U.S. GAAP and International Financial Reporting Standards 2 Contents 1. Introduction .................................................................................................................................................. 6 International standards and the IASB ............................................................................................................ 6 Financial accounting and reporting in the United States ................................................................................ 6 IFRS and U.S. GAAP comparison ................................................................................................................. 6 Overall financial statement presentation ................................................................................................... 8 General .......................................................................................................................................................... 8 Statement of financial position / balance sheet .............................................................................................. 9 Statement of comprehensive income / income statement ........................................................................... 12 Statement of changes in equity...
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