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The "audit failure" issue is one that we should all be concerned about, but in doing so, we need to separate reality from urban myth while we still have the time (Pat McDonnell) The admission by Olympus Corp that it falsified financial reports for more than a decade should not shock anyone. The shock is that, for years, auditors failed to detect such massive fraud. The failures of auditors to uncover cooked books, which run the gamut from Adelphia to Waste Management Inc, are a cancer on the accounting industry. Modern financial history is chock full of such stories, in which managements at brand name companies hide losses, fabricate revenues, report imaginary profits and claim to have assets that turn out to be non-existent, all of which supposedly independent auditors either fail to detect or keep quiet. "A gray area where the accounting is being perverted; where managers are cutting corners; and, where earnings reports reflect the desires of management rather than the underlying financial performance of the company." (David Johnstone) Tony Tinker, an accounting professor at Baruch College in New York who is a leader in the critical accounting movement which favours more robust and skeptical examinations, says "auditors aren't trying too hard to find stuff. Remember in Waste Management the management and the auditors signed a 'contract' to fix the mess, each year, for five years." Tinker points to a second problem: the SEC and other white-collar law enforcement agencies "are so understaffed and underfunded" that there is little risk of official inquiry and even less of official action. Professor Prem Sikka, a reformer at the University of Essex in Britain, notes surveys showing that "as many as 70 percent of auditors admit to falsified audit work" in surveys of countries around the world. "We need to look at the internal value systems and culture of the accounting firms," Sikka said. There is the real problem - the structure and the rules of auditing. Discuss
Which of the following combinations of accounting practices will lead to the highest reported earnings in an inflationary environment?
China Corp. has a current capital structure of $18 million in secured bonds paying 6.5% annual interest, $8 million in preferred stock with a par value of $50 per share and an annual dividend of $3.80 per share
Provide a brief definition of compilation and review performed in accordance with the SSARS. Include the type of assurance provided.
A single product in one department and uses a process costing system. At the start of May, there were 10,000 units in process that were 100 percent complete with respect to direct material and 60 percent complete with respect to conversion costs (..
Offshore Ale Company has earnings available to common stockholders of $2 million and has 500,000 shares of common stock outstanding. What is its earnings per share (EPS)?
Summary balance sheet data for Greener Gardens Co. is shown below (in thousands of dollars). The company is in a highly seasonal business, and the data show its assets and liabilities at peak and off-peak seasons:
Determine the premium expense to be reported in the income statement and the estimated liability for premiums on the balance sheet for 2004 and 2005.
Net loss is $130,000 and the partners have no written partnership agreement.
Suppose you are studying two hardware lease proposals. Option 1 costs $4,000,but requires that the entire amount be paid in advance.
In the manufacture of 10,000 units of a product, direct materials cost incurred was $145,800, direct labor cost incurred was $82,000, and applied factory overhead was $45,500. What is the total conversion cost?
A firm expects to sell 10,000 units of its product annually. It estimates that it costs $200 to place an order and that each unit costs $7 annually to carry in inventory. It takes 7 days to receive an order once it is placed, and the store is open..
Assuming no impairment in value prior to transfer, how would one record assets transferred by a parent company to another entity it has created on the newly created entity's books?
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