Category: Finance

Cost Accounting Basics and Components

Cost Accounting Basics and Components
Cost Accounting Basics and Components

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Cost Accounting Basics and Components

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Overview

Complete a 4-part assessment in which you prepare and make decisions using statements for cost of goods manufactured (COGM) and cost of goods sold (COGS); record and make journal entries for scrapping unusable materials; compute and prepare payroll journal entries in a cost accounting system; and determine factory overhead and adjustments.

By successfully completing this assessment, you will demonstrate your proficiency in the following course competencies and assessment criteria:

Competency 1: Operate product-based cost accounting systems.

  • Prepare a statement of cost of goods manufactured.
  • Prepare the cost of good section of an income statement.
  • Record journal entries for scrapping unusable materials.
  • Compute payroll earnings from general ledger and other records.
  • Prepare a journal entry that distributes total earnings.
  • Determine the prorated amount of over-applied factory overhead.
  • Prepare the journal entry to close a credit balance in under- and over-applied factory overhead.

Cost Accounting Basics and Components

Context

Accounting information systems within large corporations consist of two major subsystems: a financial accounting system and a cost accounting system. One of the main distinctions between the two systems is the target audience for the information.

Financial accounting information is primarily for external users of financial information, including investors, creditors, and government agencies.

Cost accounting information is aimed primarily at internal users and provides information that is useful to managers for planning and controlling costs, making continuous improvements, and decision making.

Before beginning this assessment, take time to review the following topics:

  • Cost of goods manufactured.
  • Cost of goods sold.
  • Scrap materials.
  • Payroll earnings and taxes.
  • Computing under- and over-applied overhead.

Cost Accounting Basics and Components

Question to Consider

To deepen your understanding, you are encouraged to consider the questions below and discuss them with a fellow learner, a work associate, an interested friend, or a member of the business community.

  • What circumstances created the need for the Sarbanes-Oxley Act? What is the impact of this Act for organizational leaders such as the Chief Executive Officer (CEO) and Chief Financial Officer (CFO)?
  • There are many approaches to the payroll record design. What are the types of employee data found in the payroll record for manufacturing companies? What about services companies?
  • What are the advantages and disadvantages underlying the high-low method of analyzing semi-variable costs?

Cost Accounting Basics and Components

Resources

The following resources are required to complete the assessment.

Library Resources

VanDerbeck, E. J. (2013). Principles of cost accounting (16th ed.). Mason, OH: South-Western Cengage Learning.

  • Chapters 1, 2, 3, and 4.
  • Wild, J. J., Shaw, K. W., & Chiappetta, B. (2011). Financial and managerial accounting: Information for decisions (4th ed.). New York, NY: McGraw-Hill.

Cost Accounting Basics and Components

Assessment Instructions

Use the Assessment 1 Template, linked in the Resources, to complete the following four parts. Each part is a different tab in the template.

  • Part 1: In the template, review the Central Manufacturing Company Statement for January. Based on the data provided in the template, prepare (a) the statement of cost of goods manufactured and (b) the cost of goods sold section of the income statement.
  • Part 2: Consider Central Manufacturing’s loss of materials scenario described in Part 2 of the template, and then follow the instructions to record the journal entries for scrapping the materials.
  • Part 3: Compute payroll earnings and prepare the related journal entry for the scenario detailed in Part 3 of the template.
  • Part 4: Use Part 4 of the template and the scenario included to (a) determine the prorated amount of over-applied factory overhead, and (b) prepare the related journal entry to close the credit balance in under- and over-applied factory overhead.

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Investment Banks and Financial Institutions

Investment Banks & Financial Institutions
Investment Banks & Financial Institutions

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Investment Banks and Financial Institutions

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Investment Banks and Financial Institutions

1. Answer questions 4-8 in the attached document. 
2. Answer Problems 35, 37, 39, and 41 in the attached documents then answer them again using the below scenarios. 
3. Redo problem 35, assuming a coupon rate of 8% in part a, and yields to maturity of 12 and 12.5% in part b ?
4. Repeat problem 37, assuming that the zero coupon bond has 7 years to maturity.
5. Repeat problem 39, assuming that the three bonds under consideration have 6 years to maturity.
6. Repeat problem 41, assuming that the fair present value rose from $975 to $ 990.

Investment banking is the division of a bank or financial institution that serves governments, corporations, and institutions by providing underwriting (capital raising) and mergers and acquisitions (M&A) advisory services. Investment banks act as intermediaries between investors (who have money to invest) and corporations (who require capital to grow and run their businesses).

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Investment Banks and Financial Institutions

PART 1
Questions 4 to 8
Question 4
Identify whether a bond will be considered a premium bond, a discount or a par bond
a) A bond with a market price higher than its par value is a premium bond
b) A bond with a coupon rate equals to its yield to maturity is considered a par bond
c) A bond with a coupon rate less than the required rate of return is considered a discount bond
d) A bond whose coupon rate is less than its yield to maturity is considered a discount bond
e) A bond whose coupon rate is greater than its yield to maturity is considered a premium bond
f) a bond whose fair value is less than its face value is considered a discount bond

Question 5
How equity valuation differ from bond valuation
Valuation of equity onsiders dividend on stock, growth rate, rate of return. These considerations are appropriate where an entity uses dividend growth model
formular where dividend growth factor is equal throughout: Po = D1/r – g
where dividend growth factor is not equal: Po = {Dn (1 + gn)/r – g} (1/(1 + r)n)
Valuation of bond considers bond coupon rate, investors required rate of return, maturity value and maturity period
Formulae = (Intr x PVAF) + (MV x PVIFrn)

Question 6
What happens to the fair present value of a bond when the required rate of return on the bond increases
An increase in required rate of return lowers the fair present value of a bond

Question 7
A change in interest rate affects the price of of both short and long because change in interest rate affects the yield of both and long and short-term loan
Long-term bond’s price is more affected by increase in interest rate due to long duration they cove

Question 8
Bond’s price with large coupon rate are affected with the change in interest rates more than bond’s price with a small interest rate.
This is because large coupon rate reduces bond’s price by a larger margin.

Investment Banks and Financial Institutions

PART 2
Aswer problems
Problem 35
a) what is the duration of a five year treasury bond with a 10% semi-annual selling at per
periods = 2 x 5 years = 10 periods
par value= $1000
coupon = 10%/2 = 5%
interest = 5% x 1000 = 50
bond = (50 x PVIF 10 periods @ 5%) + (1050 x PVIF10 periods @5%) =
= 47.62 + 952.38 X10 = $9571.42
Price = 952.38 + 47.62 = $1000
period = 9571.42/1000 = 9.57/2 = 4.78

b) duration if the yield to maturity increases to 14% and 16%
1st period interest 14% x 1000 x 1/1+0.14 = 122.81
2nd (140 + 1000 ) x 0.7695 = 877.19
(877.19 x 10 ) + 122.81 = $8894.71
price = 1000
8894.71/1000 = 8.89/2 = 4.4 YEARS

At 16%
1st period interest 16% x 1000 x 1/1+0.16 = 137.93
2nd (160 + 1000 ) x 0.7432 = 862.07
(862.07 x 10 ) + 137.93 = $8758
price = 1000
8758.62/1000 = 8.75/2 = 4.3 years

c) Conclusion
An increase in bond yield to maturity reduces the duration of a bond. This is because an increased yield to maturity increases the cash inflow hence reducing the period of maturity

Problem 37
Duration of zero coupon bond that has eight years to maturity
The duration of a bond with a zero coupon rate is the same its maturity date. Thus the duration of the bond is 8 years
if the duration of maturity increases to 10 years, bo nd duration will be 10 years
if the maturity increases to 12 years, bond duration will be 12 years

Problem 39

a) At 8%
interest = 8% x 10000 = 800
1st 800 x 0.9259 = $740.74
2nd (800 + 10000) x 0.8573 = 9259.26
total = (9259.26 x 5) + 740.74 = $47036.29/10000 = 4.7 years

b) at 10%
interest = 10% x 10000 = 1000
1st 1000 x 0.9091 = $909.10
2nd (1000 + 10000) x 0.8264 = 9090.91
Total = (9090.91 x 5) + 909.1 = $46363.65/10000 = 4.6 years

c) coupon rate 12%
interest = 12% x 10000 = 1200
1st 1200 x 0.8929 = $1071
2nd (1071 + 10000) x 0.7972 = 8825.73
Total = (8825.73 x 5) + 1071= $45199.67/10000 = 4.5 years

Problem 41
At 9.75%
interest = 9.75% x 975 = $95.06

at 9.25%
interest = 9.25% x 995 = $92.04
995/92.04 = 974/95.06 = 10 years

Investment Banks and Financial Institutions

PART 3
Problem 35
a) Coupon rate of 8%
interest = 8% x 1000 = 80
1st 80 x 0.9259 = $74.07
2nd (80 + 1000) x 0.8573 = 925.92
total = (925.92 x 5) + 74.07 = $4703.63/10000 = 4.7 years

b) yield to maturity is 12%
interest = 12% x 1000 = 120
1st 120 x 0.8929 = $107.1
2nd (107.1 + 1000) x 0.7972 = 882.57
Total = (882.57 x 5) + 107.1= $4519.96/1000 = 4.5 years

Yield to maturity is 12.5%
interest = 12.5% x 1000 = 125
1st 125 x 0.8889 = $111.1
2nd (111.1 + 1000) x 0.7901 = 877.91
Total = ( 877.91 x 5) + 111.1= $4500.63/1000 = 4.5 years

Investment Banks and Financial Institutions

PART 4
Problem 37
Duration of zero coupon bond that has seven years to maturity
The duration of a bond with a zero coupon rate is the same its maturity date. Thus the duration of the bond is 7 years
if the duration of maturity increases to 10 years, bo nd duration will be 10 years
if the maturity increases to 12 years, bond duration will be 12 years

PART 5
Repeat problem 39,assuming that the three bonds under consideration have 6 years to maturity.

a) At 8%
interest = 8% x 10000 = 800
1st 800 x 0.9259 = $740.74
2nd (800 + 10000) x 0.8573 = 9259.26
total = (9259.26 x 6) + 740.74 = $56296.3/10000 = 5.6 years

b) at 10%
interest = 10% x 10000 = 1000
1st 1000 x 0.9091 = $909.10
2nd (1000 + 10000) x 0.8264 = 9090.91
Total = (9090.91 x 6) + 909.1 = $55455.37/10000 = 5.5 years

c) coupon rate 12%
interest = 12% x 10000 = 1200
1st 1200 x 0.8929 = $1071
2nd (1071 + 10000) x 0.7972 = 8825.73
Total = (8825.73 x 6) + 1071= $54025.38/10000 =5.4 years

Investment Banks and Financial Institutions

PART 6
Repeat problem 41, assuming that the fair present value rose from $975 to $ 990

duration = 990/9.25 = 10.7 years

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Macroeconomic Issues for 2018 in the Us and Europe

Macroeconomic Issues
Macroeconomic Issues

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Macroeconomic Issues

Order Instructions:
I want you to write and upload your analysis of what are the key macroeconomic issues for 2018 in the US and in Europe. Discuss the 5 below in a paragraph for each.

Five critical issues for 2018 macroeconomics are said to be:
1. tax reform shake out (Will Federal Reform work, what happens to State taxes?)
2. Can reduction in international imports to the US, raise US Exports and reignite the US GDP (Will bilateral trade agreements work to lower the trade deficit? Should it?);
3. Will Brexit cause or create Europe to grow faster?
4. Will capital formation and growth continue to reduce return to wages and increase inequality? (Will there be an increase in the productivity of labor or will it help increase wages or jobs?)
5. Other- You decide. Explain why you include this. It may be a country, a region or an economic category As the above 4.)

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Macroeconomic Issues Essay

Tax reform shake out

The tax reform shake out refers to the congressional battle to sway votes to either support or reject the proposed reforms. The reforms constitute a number of proposals from a 2016 blueprint report from the US Congress as well as the one page plan revealed by the US President in April 2017. The reforms include a reduction in marginal tax rates, expanding support for childcare, rescinding alternative minimum tax, and eliminating various deductions (O’Brien, 2017; Speaker Paul Ryan, 2016).

The tax reform could work since it is a pertinent bill that affects the lives and incomes of the majority of low to medium income earners in the country. The impacts of the reform on state taxes include a broadening of the downward flow of revenue, expansion of the tax base, and uniformity in the conformity by different states (Griffith, 2017; Kaeding & Pomerleau, 2017).

International imports to the US and bilateral trade agreements

In the attempt to correct the trade deficit, reducing the level of international imports to the US would not be the most effective approach to solving the issue. As a rebate, the trade partners might reduce their purchases from the US and lead to increased deficits. As such, a worthwhile approach would be the use of bilateral trade agreements with important trade allies such as China and Germany.

Such agreements ensure there is continued trade and sets quotas of operation where each country has a given level of exports and imports it has to provide (McTeer, 2013; Baumohl, 2012). Therefore, the bilateral agreements can help to lower the trade deficit….

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Company Performance Analysis

Company Performance Analysis
Company Performance Analysis

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Company Performance Analysis

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Please read the cases 10 and 12 and answer the following questions

Assignment of case 10

1)  Review the two exhibits for Lowe’s & Home Depot (Exhibit 7 and 8). Examine ratios. See the excel file of case 10.

Prepare ratios for Lowe’s, using data from exhibit #5, which should be identical to those in exhibit 7 modeled by Home Depot. See below:

Fiscal year
19971998199920002001
Working capital (CA-NIBCL*)
Fixed assets
 Total capital
Tax rate
 NOPAT (EBIT*(1-t))
Return on capital (NOPAT/Total capital)
Return on equity (Net earnings/S. Equity)
Gross margin (Gross profit/Sales)
Cash operating expenses/Sales
Depreciation/Sales
Depreciation/P&E
Operating margin (EBIT/Sales)
NOPAT margin (NOPAT/Sales)
Total capital turnover (Sales/Total capital)
P&E turnover (Sales/P&E)
Working capital turnover (Sales/WC)
Receivable turnover (Sales/AR)
Inventory turnover (COGS/M. inventory)
Sales per store ($ millions)
Sales per sq foot ($)
Sales per transaction ($)
Total sales growth
Sales growth for existing stores
Growth in new stores
Growth in sq footage per store
 Total Capital/Equity

Which firm is the better performing one? On what basis do you conclude the better performance?

2) Who deserves the “Management of the Year” award in the retail building-supply industry? Compare based on 2001 firm performance.

  • Conduct DuPont analysis for both two firms and analyze their return sources?ROE=(NI/sale)*(sale/total capital)*(total capital/total equity)

*Prepare a DuPont analysis to evaluate the differences in performance?

  • Why the two firms have the same beta (exhibit 3), but the WACC are different?
    • Compare the two firms’ return on capital in 2011.
      • According to ROC, which one is better?
      •  Consider their WACC.
    • Which firm’s stock performs better during 2001? Why?
    • What is the bottom line to measure manager performance? Future or history?

3) How does the Home Depot forecasting model work? Why do we use ratios to forecast financial statements?  Hint: walk through the mechanics of the model, focusing on the 2002 forecast (exhibit 8)?

Company Performance Analysis

Assignment of case 12

  1. What is the current situation?
  2. Why did the company run out of cash? Think of the source and use of cash.
  3. What are the consequences for the company?
  4. what is the effect of running out of cash to the company?
  5. What are Kumar’s alternatives for action? And the effect and feasibility of each possible action:

1: Slower growth:

2: Improving profitability

3: Cutting dividends

4: reduce investment

  • What impact might the below two proposals have on the financial needs of the firm?

a): Proposal from the transportation manager to reduce raw material inventory.

b): Proposal from the operations manager to level production.

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Company Performance Analysis Essay

Ratio analysis for Lowe’s

VALUE LINE PUBLISHING, OCTOBER 2002
Ratio Analysis for Lowes
Fiscal year
19971998199920002001
Working capital (CA-NIBCL*)7721,0121,4601,5392,063
Fixed assets3,1103,7595,3197,2018,816
 Total capital3,8814,7716,7798,73910,879
Tax rate38.9%39.2%39.0%38.8%38.6%
 NOPAT (EBIT*(1-t))3815077158581,104
PROFITABILITY
Return on capital (NOPAT/Total capital)9.8%10.6%10.5%9.8%10.1%
Return on equity (Net earnings/S. Equity)13.7%15.4%14.3%14.7%15.3%
MARGINS
Gross margin (Gross profit/Sales)26.5%26.9%27.5%28.2%28.8%
Cash operating expenses/Sales18.0%17.9%18.0%18.5%18.3%
Depreciation/Sales2.4%2.2%2.1%2.2%2.4%
Depreciation/P&E8.0%7.5%6.5%5.8%6.2%
Operating margin (EBIT/Sales)6.2%6.8%7.4%7.5%8.1%
NOPAT margin (NOPAT/Sales)3.8%4.1%4.5%4.6%5.0%
TURNOVER
Total capital turnover (Sales/Total capital)2.62.62.32.12.0
P&E turnover (Sales/P&E)3.43.43.12.72.6
Working capital turnover (Sales/WC)13.112.110.912.210.7
Receivable turnover (Sales/AR)85.685.1107.5116.6133.5
Inventory turnover (COGS/M. inventory)4.34.34.14.14.4
Sales per store ($ millions)21.323.527.628.929.7
Sales per sq. foot ($)254.3256.2279.1277.1274.0
Sales per transaction ($)43.945.753.254.956.0
GROWTH
Total sales growth20.8%29.9%18.1%17.7%
Sales growth for existing stores10.8%17.3%4.6%2.9%
Growth in new stores9.0%10.8%12.8%14.5%
Growth in sq. footage per store10.0%7.6%5.4%4.0%
LEVERAGE
 Total Capital/Equity1.491.521.441.591.63
*Non-interest-bearing current liabilities

Company Performance Analysis

Which firm is the better performing one? On what basis do you conclude the better performance?

The analysis indicates that Home Depot is performing better than Lowe’s. The basis of this conclusion is a number of performance metrics and ratios from the analysis above. For example, in terms of profitability, Home Depot has a consistently higher return on capital and as well as a return on equity compared to Lowe’s. In terms of margins, Home Depot also had a consistently higher gross margin, operating margin, and NOPAT margin during the period.

In terms of the turnover, Home Depot has a higher turnover result from their capital allocation, P&E, working capital, and inventory. In addition, average of the sales per store, sales per square foot, and sales per transaction is higher for Home Depot than Lowe’s.

In terms of growth, the average is higher in each metric for Home Depot than that of Lowe’s. In each case, the average of the period is higher for Home Depot than Lowe’s. This implies that the growth in total sales, the growth of sales in the existing stores, the growth in new stores, is higher for Home Depot than it is for Lowes during the same period. As such, the various metrics and financial ratios in the analysis above point towards better performance for Home Depot compared to Lowes.

Who deserves the “Management of the Year” award in the retail building-supply industry based on 2001 firm performance?

The DuPont analysis conducted below indicates the return sources for both Home Depot and Lowe’s. The analysis also indicates various differences in the performance between the two companies.

DuPont analysis for Lowe’s
ROE13.7%15.4%14.3%14.7%15.3% 
NP Margin4%4%4%4%5% 
TATO1.941.931.761.651.61 
FLM2.012.021.922.072.06 
DuPont analysis for Home Depot
ROE16.3%18.5%18.8%17.2%16.8%
NP Margin4.8%5.3%6.0%5.6%5.7%
TATO2.152.242.252.142.03
FLM1.581.541.381.431.46

Beta is a financial ratio that measures the level of risk the company has in relation to the market (Bodie, Kane, & Marcus, 2013, pp. 171 – 172). The reason behind the firms’ similar level of risk exposure as indicated by the same measure of beta is due to the fact that both Lowe’s and Home Depot operate in the same segment of the same industry.

As such, they are exposed to the same market forces which direct the same level of market risk in the way of the retail stores in the building-supply industry. In addition, the WACC is different for the firms because they have different levels of leverage, with Lowe’s being higher as shown by the higher FLM ratio as indicated in the analysis above…..

Company Performance Analysis

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Percentage of sales forecasting Case Study

Percentage of sales forecasting
Percentage of sales forecasting

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Percentage of sales forecasting

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Case Studies in Finance Edition: 7 Authors: Robert F . Bruner, Kenneth Eades, & M ichael Schill ISBN: 9780077861711

Week 4 reading:

In this week, you need to finish the reading of case 9:

  1. Case 9: The Body Shop

Introduction case 9:

In this case, you are cast in the role of adviser to Anita Roddick, the managing director of the Body Shop. You are to prepare a three-year forecast of the firm’s income statements and balance sheets. The case is intended to introduce percentage of sales forecasting and walks the student through the preparation of a simplified forecast using a spreadsheet program on the personal computer. The case emphasizes the importance of being able to speak plainly about one’s financial forecast and the insights that are of use to the general manager.

Main skill to develop: Percentage of sales forecasting

Please listen the video to learn how to do Percentage of sales forecasting:

The process to do percentage-of-sale forecasting for the body shop:

  1. Calculate the growth rate of sale in each year: from 1999 to 2000, from 2000 to 2001.
  2. Calculate the percentage of each item with respect of sales (turnover) in each year.
  3. Based on the calculation of 1), estimate the sale growth rate during years 2002-2004.
  4. Based on the calculation of 2), estimate the percentage of each item with respect to sale during year 2002-2004.
  5. Estimate the values of items in financial statements in each year.
  6. Adjust the “cash” and “overdraft” to make the balance sheet balanced: total asset= total liability.

Key points in case 9:

Pay attention:

  1. Sources of assumptions: growth rates could originate from the following:
  2. historical growth rate for the firm
  3. historic growth rates for peers
  4. target growth rates used by the firm
  5. When processing forecasting, which items are changed with sale, and which are not changed with sales?
  6. The use of Overdrafts, cash to make the total asset=total liability

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DuPont Ratio Analysis Case Study

DuPont Ratio Analysis
DuPont Ratio Analysis

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DuPont Ratio Analysis

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Case Studies in Finance Edition: 7 Authors: Robert F . Bruner, Kenneth Eades, & M ichael Schill ISBN: 9780077861711

Week 4 reading:

In this week, you need to finish the reading of case 8:

  1. Case 8: Krispy Kreme Doughnuts

Summary of case 8:

This case considers the sudden and very large drop in the market value of equity for Krispy Kreme Doughnuts, Inc., associated with a series of announcements made in 2004. Those announcements caused investors to revise their expectations about the future growth of Krispy Kreme, which had been one of the most rapidly growing American corporations in the new millennium. Your task is to evaluate the implications of those announcements and to assess the financial health of the company. This case is intended to be introductory: it can provide a first exercise in financial statement analysis and lay the foundation for two important financial themes: the concept of financial health, and the financial-economic definition of value and its determinant

Main skills to develop: DuPont Ratio Analysis:

Please see: http://www.investopedia.com/terms/d/dupontanalysis.asp

Key points in case 8:

  • Growth: Case Exhibit 1,
  • The company showed a net loss in the first quarter of 2005. Growth has occurred in accounts receivables from affiliates and from reacquired franchise rights, the very item that was the focus of the startling revelations in the Wall Street Journal in May 2004, which described the alleged “aggressive accounting treatment,” whereby the company did not amortize the value of these intangible assets.[1] 
  • Liquidity, leverage, and profitability:
  • Peer Comparisons:

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Investment Management Questions

Investment Management
Investment Management

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Investment Management

  • Assume that the company is announcing an unexpectedly large dividend to its shareholders. In an efficient market without information leakage, one might expect:
  • Which one of the following would provide evidence against the semi strong form of the efficient market theory?
  • According to the efficient market hypothesis:
  • A “random walk” occurs when:
  • A market anomaly refers to:
  • In an efficient market, professional portfolio management can offer all of the following benefits except:
  • “Highly variable stock prices suggest that the market does not know how to price stocks.” Respond.
  • Which of the following sources of market inefficiency would be most easily exploited?
  • Dollar-cost averaging means that you buy equal dollar amounts of a stock every period, for example, $500 per month. The strategy is based on the idea that when the stock price is low, your fixed monthly purchase will buy more shares, and when the price is high, fewer shares. Averaging over time, you will end up buying more shares when the stock is cheaper and fewer when it is relatively expensive. Therefore, by design, you will exhibit good marketing timing. Evaluate this strategy.

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Banking and Financial Institutions

Banking and Financial Institutions
Banking and Financial Institutions

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Banking and Financial Institutions

Question 1

Capital markets refer to the financial markets where debt and equity instruments with maturities of more than one year are traded. Bond markets are part of the capital markets…

Question 2

T-bills are a short term financial instrument used by the government to source for revenue in order to cover for shortfalls. They are sold through an auction, issued in multiples of $1000…

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Question 3

A STRIP (Separate Trading of Registered Interest and Principal Securities) is a form of a treasury financial security whose…

Question 4

Investing in TIPS bonds has the advantage of having their returns based on…

Question 5

Bearer bonds refer to a type of bond where the coupon is attached to the bond and is, therefore, payable to the…

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Auditors and Regulatory Oversight

Auditors and Regulatory Oversight
Auditors and Regulatory Oversight

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Auditors and Regulatory Oversight

Order Instructions:

The Securities and Exchange Commission (SEC) regulates public companies. The SEC has found that some of these companies have violated GAAP by using creative accounting practices to mislead investors and creditors regarding the health of their company.

Use the Internet or Strayer Library to research a recent accounting scandal within the last five (5) years where the SEC accused public companies of accounting irregularities.

Write a three to four (3-4) page paper in which you:

Analyze the audit report that the CPA firm issued. Ascertain the legal liability to third parties who relied on financial statements under both common and federal securities laws. Justify your response

Auditors and Regulatory Oversight

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Speculate on which statement of generally acceptable auditing standards (GAAS) that the company violated in performing the audit.

Compare the responsibility of both management and the auditor for financial reporting, and give your opinion as to which party should have the greater burden. Defend your position.

Analyze the sanctions available under SOX, and recommend the key action(s) that the PCAOB should take in order to hold management or the audit firm accountable for the accounting irregularities. Provide a rationale for your response.

Use at least two (2) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.

Auditors and Regulatory Oversight

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Your assignment must follow these formatting requirements:

This course requires use of Strayer Writing Standards (SWS). The format is different than other Strayer University courses. Please take a moment to review the SWS documentation for details.

Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

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The specific course learning outcomes associated with this assignment are:

Analyze the required generally accepted auditing standards, professional ethics, and legal liability of the auditor.

Assess how the Sarbanes-Oxley Act has affected auditing.

Evaluate an audit report.

Evaluate objectives for conducting audits, and compare management’s and auditors’ responsibilities.

Use technology and information resources to research issues in auditing.

Write clearly and concisely about auditing using proper writing mechanics.

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