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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
The Alperti Company manufactures surgical gowns for hospitals. Their controller, Ethell Hieken is preparing the variance analysis report for October. Standard Costs are as follows: What is the material price variance?
On December 31, 2011, Henry, a sole proprietor, sold for $65,000 a machine that was used in his business. The machine had been purchased in 2003 for $50,000, and when it was sold it had an adjusted basis of $30,000. For the year 2011, how should t..
Tommy purchases and places in service in 2011 personal property costing $900,000. What is the maximum Sec. 179 deduction that Tommy can deduct, ignoring any taxable income limitation?
The SEC currently requires foreign companies that list shares on U.S. exchanges to provide:
Elaine provides more than half of the support for her son James, who does NOT live with her. James is 26 and is a full-time law student. He earns $2,000 from a part-time job. He has a $11,000 scholarship covering his tuition.
Andy had AGI of $80,000 for 2011. He was injured in a rock-climbing accident and paid $5,200 for hospital expenses and $2,800 for doctor bills.
What does the cost manager do? What information does the cost manager get and how does he use it? What decision does the cot manager make about production and how does it affect shareholders?
An individual actually earned a 4% nominal return last year. Prices went up by 3% over the year. Given that the investment income was subject to a federal tax rate of 28% and a state, and local tax rate of 6%
Compare and contrast an income statement and a balance sheet. What do they measure? Why would a marketing manager find the income statement more useful than the balance sheet?
The following payoff table shows the profit for a decision problem with three states of nature and two Decision Alternatives (DA):
Which method is generally accepted? Why do you think this method is generally accepted? Explain your position.
Sun estimates the fair value of the recourse liability at $100,000. What would be recorded as a gain (loss) on the transfer of receivables?
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