How would this technique affect the profits of future period

Assignment Help Finance Basics
Reference no: EM131411134

In "Behind the Wave of Corporate Fraud: A Change in How Auditors Work," the Wall Street Journal detailed several of the recent accounting scandals and the techniques management used to deceive both the auditors and the investing public. The article focused on audit techniques that contributed to the ability of management to undertake deceptive practices. For example, WorldCom reclassified ordinary expenses as assets, which the auditors missed because there was "no supporting documentation"; Tyco International, charged with inflating profits by over $1 billion, left "warning signs" that were not followed up on by auditors; and HealthSouth Corporation pulled it off by inflating the dollar amounts of a large number of small revenue recognition transactions because they "knew the auditors did not look at increases of less than $5,000."

REQUIRED:

a. Explain how WorldCom showed higher profits in the current period by inaccurately classifying expenses as assets. How would this technique affect the profits of future periods?

b. Explain why management may be tempted to inflate profits in the current period.

c. Explain why auditors might not check transactions below a certain dollar amount.

d. How could high-quality internal controls have helped in avoiding these frauds?

Reference no: EM131411134

Questions Cloud

Analyze an ethical issue that a business has faced : You will identify and analyze an ethical issue that a business, corporation or profession has faced, or is currently confronting. You must first submit the proposed issue you intend to research for approval before proceeding.
Compare the tang empress wu zetian : Comparing Ancient Female Rulers. Compare the Tang Empress Wu Zetian (also known as Empress Wu or as Wu Zhao; ruled China around 690-705 AD) with either the Pharaoh Cleopatra (ruled Egypt around 51-31 BC) or the Pharaoh Hatshepsut (ruled Egypt arou..
Ireland became focused on protestant vs catholic : Why do you think the conflict In Ireland became focused on protestant vs catholic? and Do you think Ireland could have avoided the war of independence had Gladstone's home rule bills passed?
Explain why given volunteer sample is a poor study design : A proposed study design is to leave 100 questionnaires by the checkout line in a student cafeteria. The questionnaire can be picked up by any student and returned to the cashier. Explain why this volunteer sample is a poor study design.
How would this technique affect the profits of future period : Explain how WorldCom showed higher profits in the current period by inaccurately classifying expenses as assets. How would this technique affect the profits of future periods?
Studied in course impacted history the most : What leader that was studied in this course impacted history the most? This should be someone from Europe. Choose the leader who impacted history either good or bad and explain the rationale for your answer giving at least four specific examples o..
Discuss the role of knowledge networks : Discuss the role of knowledge networks and explain a strategy for managing them. Discussion should be of 250 words with no plagarism follow APA Format need to mention two references.
Rapid growth of unions : The Great Depression of the 1930s and the Second World War were associated with a rapid growth of unions, and a much larger federal government -- one that assumed responsibility for the overall economy and for protecting particular groups
How operating profits are measured by bmw and gm : Why would an analyst from Goldman Sachs be concerned about how operating profits are measured by BMW and GM?

Reviews

Write a Review

 

Finance Basics Questions & Answers

  On initiating or expanding business in a particular

on initiating or expanding business in a particular country or region of the world. describe the strategyies used to

  Finding out strength as well as weakness of organization

Finding out strength as well as weakness of organization using ratio analysis and what is causing this drop in net income

  Comment on the risk exposure and the risk-return profile

Consider a newly-listed company of interest to you and using the 2009 or 2010 annual accounting reports explain its business and financial environment.

  Is there one piece that has made an impact on you

Is there one piece (a painting, a sculpture, a building) that has made an impact on you or that you found particularly impressive or memorable?

  In which country would the treasurer want to invest

The spot exchange rate is £0.70, and the three-month forward rate is £0.71. Ignoring transaction costs, in which country would the treasurer want to invest the company's funds? Why?

  1 assume you are to receive a 10-year annuity with annual

1. assume you are to receive a 10-year annuity with annual payments of 800. the first payment will be received at the

  Interest rates are abysmally low stocks are slumping and

interest rates are abysmally low. stocks are slumping and volatile. currencies are erratic and commodities might be

  Justify analyze the following situation and answer

justify analyze the following situation and answer questions. after choosing a savings account with 3 interest rate you

  Typical investment project increases

All else constant, the net present value of a typical investment project increases when:

  Nbsp1 the us financial system is composed of 1 policy

nbsp1. the u.s. financial system is composed of 1 policy makers 2 a monetary system 3 financial institutions and 4

  Qualitative approach to risk assessment

Describe the qualitative approach to risk assessment. Why does this approach, which does not rely on numerical data, work?

  Describe how peachtree complete accounting produces

financing cycle 2 pages answer the following questions.how can you create and maintain the chart of accounts?how can

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd