Abstract This paper discusses the two unique sub-functions within the accounting field: managerial accounting and financialaccounting. The specific functions, responsibilities and duties of each function are discussed. Further consideration is given to the ethical implications involved with each accounting division. Enron is mentioned as a prime example of how ethical considerations can not only undermine the financial solvency of a company but, ultimately, can cause its demise.
From the Paper "The presence of financial accountants and management accountants in most large corporations today is a testament to the complexity of the global economy, the legal and governance rules an entity must operate under, and the sheer amount of information the profession must deal with on a daily basis. Though there are many functions that overlap within these two divisions of the same profession, each classification serves a uniquely strategic function. In general, financial accounting is responsible for the historical financial records and data of a company and is largely responsible for ensuring legal and regulatory compliance. Managerial accounting is responsible for providing interpretive reports of financial accounts which managers and executives use to make operational decisions and devise corporate strategy. "
Abstract This paper addresses what forensic accountants look for in ferreting out who is committing managerial fraud and how. It discusses how auditing relies on tests of controls, risk analysis and sampling to make an honest assessment.
From the Paper "As much as CPA's hate to admit it, auditing is an art not a science. It simply is not cost effective to verify every assertion in a set of financial statements with certainty. Instead, auditing relies on tests of controls, risk analysis and sampling to give the reasonable assurance that a set of financial statements are fairly presented in accordance with the applicable accounting standards. When that reasonable assurance is found to be misplaced, forensic accountants are called in. The definition of forensic accounting according..."
Tags: forensic accounting methods, definition, constrast with financialaccounting, auditing
Abstract This paper describes the increased difficulties in understanding the financial statements of insurance companies that will occur as a result of FinancialAccounting Standard 115 (FAS 115) adopted by the FinancialAccounting Standards Board. The paper explains that FAS 115 will create wide variations between companies in the carrying values used for debt securities which will necessitate even more analysis to determine a company's financial condition as well as make it impossible to compare companies' financial positions without restating each company's debt-security portfolio values to a common basis.
From the Paper "Higher equity levels created by having debt securities carried at market will be misleading to financial statement users. Hardly anyone believes that a company can fully retain the security gains that currently exist in their portfolios. To do so would require curtailing crediting rates to those available based on current rates on new money. Competitive pressures won't allow companies to do this and retain their policyholder funds. To reflect such gains as equity of the company in the financials is just plain misleading."
Abstract In this article the writer discusses the two unique sub-functions within the accounting field: managerial accounting and financialaccounting. The specific functions, responsibilities and duties of each function are discussed in relation to the broader field of accounting. Further consideration is given to the income statement and balance sheet and how they are related. Finally, the use of accounting principles and techniques in managerial decision-making is also discussed. The document concludes with a brief overview of accounting.
From the Paper "Accounting within the business sphere is largely divided into two separate divisions: financial and managerial accountants. The presence of financial accountants and management accountants in most large corporations today is a testament to the complexity of the global economy, the legal and governance rules an entity must operate under, and the sheer amount of information the profession must deal with on a daily basis. The importance of accounting as a basic function of business activity cannot be overstated."
Abstract This paper gives a background of the purpose and history of the FinancialAccounting Standard Board, or the FASB. The FASB was founded with the primary goal of devising the Generally Accepted Accounting Principles in United States. The paper also defines the roles of the various organizations that fall under the umbrella of the FASB, such as the SEC and the PCAOB. The paper focuses additionally of the role of ethics in accounting, especially in relation to the Standards creating by the FASB.
Explain the FASB, SEC and PCAOB
Discuss the Relationship among the FASB, SEC, and PCAOB
Explain Basic Accounting Theories, Assumptions, and Principles
Evaluate the Role of Ethics in Accounting
From the Paper "To cater to the basic objectives the financial statement is required to be relevant, to be reliable, being comparable as well as being consistent. So as to accomplish its basic objectives the GAAP is required to base on four hypotheses such as Economic Entity Assumption-that assumes the isolation of business from its owners or other businesses; Going Concern Assumption-that assumes the long term operation of business; Monetary Unit Assumption that assumes a stable currency as the unit of record; Periodicity Assumption that assumes the periodical record-ability of the business operations enabling comparison between present and past performances. "
Abstract This paper discusses the purpose of the FinancialAccounting Standards Board (FASB), which is to constantly monitor the condition of the financialaccounting standards for their relevance to current market developments in order to foresee any probable problem areas and deliver secure functioning of companies, big and small investors and government as a whole. Specifically, the paper provides an explanation of FASB 128 and gives examples of its application.
Table of Contents:
Introduction
Explanation of FASB 128 and Examples of Application
From the Paper "Thus, the financial accounting standard 128 requires the company to clearly state all the facts they include in the arriving at the earnings per share and diluted earnings per share ratio which is further on must be reported in the company income statement and thus reveal relevant information to the investors probable and those already holding the company stock. In order to avoid any misunderstanding on the actual company financial information as the number of financial derivatives has increased greatly during the recent past, the standard requires the derivatives such as options, warrants, contingently issuable shares or employee performance measures which can be convertible into common stock, to be accounted for as common stock at the most profitable price for the investors, or the market value for the conversion."
Abstract This paper investigates how the financialaccountant can affect the outcome of the company, especially in respect to promoting bankruptcy. This paper also notes that those companies that are in the process of re- organizing - such as Enron and Kmart - report to their investors to make them aware of the changes in their accounting and their management practices.
Abstract This paper is on "comparing and contrasting managerial and financialaccounting". It also explains the differences in rules and regulations, management information and reporting requirements, and CMA and CPA licenses.
Abstract This paper discusses ethical financial reporting and what organizations are involved in monitoring and regulating financial statements of public companies. This paper reports that in the United States, these rules are called Generally Accepted Accounting Principles (GAAP). Although they are not laws, the Securities and Exchange Commission requires public companies to follow them. The FinancialAccounting Standards Board is the most important organization in setting Generally Accepted Accounting Principles. Although not part of GAAP, Statements of FinancialAccounting Concepts provide the basis for Statements of FinancialAccountant Standards, which are the most important GAAP-establishing publications.
From the Paper "The framework for corporate financial management has changed significantly over the past few decades as more corporations move away from a checks and balances systems towards more of a juggling act. Recent ethical scandals including the Bre-X, Enron, and Worldcom debacles, has translated into increased scrutiny of corporate financial reporting. Some financial analysts argue that a company's ethical standards affects profitability, and those businesses that demonstrate unethical behaviour will suffer from decreased market share and profit potential, as well as increased government regulation. Increased competition between businesses has forced corporate finance managers to juggle more than one set of balance sheets depending on whether the reporting is going to the Internal Revenue Service (IRS) or shareholders."
Abstract The FinancialAccounting Standards Board released an Exposure Draft on July 14, 2005, entitled "Accounting for Uncertain Tax Positions, An Interpretation of FASB 109, Accounting for Income Taxes". This draft was released for comment before its implementation as part of the Generally Accepted Accounting Principles for entities to use in preparation of their financial reports. This paper shows that the purpose of the Exposure Draft is to resolve widespread diversity in accounting for income taxes by requiring firms to recognize in their financial statements the best estimate of the impact of a tax position. The paper shows that the ED also contains guidance for measuring the benefit that is recognized for an uncertain tax position and when that position should no longer be recognized. The paper examines comments by critics who feel that the Exposure Draft is complex, may be difficult to implement and could result in significant overstatements of firms' tax liabilities.
Paper Outline:
Abstract
Introduction
Background
Financial Reporting vs. Tax Reporting
Purpose of FASB 109, Accounting for Income Taxes
Findings
Purpose of the FASB's Exposure Draft
Discussion
Conclusion
References
From the Paper "The temporary differences between the U.S. income tax rules and the GAAP requirements for financial reporting result in some income tax expense being recorded long before it is paid creating a deferred income tax liability (Horngren, et al., p. 340). These temporary or timing differences arise because some revenue and expense items are recognized at different times for tax purposes than for financial reporting purposes. Timing differences may accumulate over more than one year and create variations between the tax basis of an asset or liability and its reported amount in financial statements. These temporary variances usually become taxable or deductible when the related asset is recovered or the related liability is settled. A deferred tax liability or asset represents the increase or decrease in taxes payable or refundable in future years as a result of temporary differences and carry forwards at the end of the current year (FASB, 1992)."
Abstract The paper relates that the FinancialAccounting Standards Board (FASB) and the International Accounting Standards Board (IASB) have decided to revise their conceptual frameworks for financial reporting and accounting. The paper notes that, ideally, the present framework of both boards will be broader and expansive so as to develop a conceptual framework, which both Boards can use as an outline for new and revised accounting standards. The paper explains that one key area that is affected is the basis of measurement and its effect on financial reporting. The paper then proceeds to evaluate the different ways that measurement is defined within the conceptual framework. The paper also analyzes the methodologies identified so that choices made in the future can be based on valid recommendations.
Outline:
Introduction
Measurement and Bases of Measurement
Criticisms
Objectives of Financial Reporting and the Bases Choice: Is there a Trade-Off
What Bases Should be Chosen?
Conclusion
From the Paper "Measurement in financial reporting is therefore dependent on a lot of external factors to the organization; which affect the process of integrating it within the conceptual framework of the IASB/FASB. Bullen and Crook (2006) states that measurement will continue to be one of the most challenging aspects of the conceptual framework since neither bodies have a clear cut definition as to what are the necessary bases that should be used nor are there a set of refined guidelines for the use of any bases. The definitions of both bodies are vague, and as such the conceptual framework continues to produce a vague definition."
Abstract This paper explains that the objectives of the FASB's conceptual framework are to identify the goals and purposes of financial reporting and their underlying fundamentals; however, it is more than two decades old and has fallen behind the times especially in the area of currency and scope. The author points out that, despite the best attempts by the FASB to provide frameworks and standards to regulate accounting practices, unethical management always seems to discover loopholes to make their accounting statements say whatever they want them to say. The paper states that principle-based standards help management work with auditors to exercise professional judgment in determining appropriate accounting; nonetheless, rules-based accounting does more to promote consistency and adherence to guidelines.
Table of Contents:
The Conceptual Framework Developed by the FASB
The Role and Ethical Considerations
Principles-Based Accounting vs. Rules-Based Accounting
From the Paper "Some believe the solution for preventing unethical accounting conduct is to regulate as many accounting translations as possible. While closing loopholes should certainly be an objective of standards setting bodies such as FASB, unethical people will always find a new and better way to behave unethically if their corporate culture allows or encourages unethical behavior or if people behaving unethically simply believe they will not be punished for their conduct. Increasingly, accountants need to be trained in ethics in addition to improving financial skills."
Tags: enron, loopholes, out-dated, guidelines, training
Abstract This paper names and describes the many bodies that influence Generally Accepted Accounting Principles (GAAP) and Generally Accepted Accounting Standards (GAAS) in the United States. Included in this paper are regulatory boards such as the the FinancialAccounting Standards Board (FASB), the Securities Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB). The author describes the role of each of these regulatory bodies as well as defines their functions and influence on each other.
From the Paper "The SEC is ultimately responsible for the enforcement of securities law. As a result, they are the main body through which investigations into accounting fraud are conducted. One of the tools they use are comment letters, which are sent to companies suspected of impropriety requesting comment from the company. The comment letters can precede the initiation of legal proceedings."
Abstract This paper explains that due to their high degree of influence, accounting professionals must adhere to a strict code of ethics. The paper then compares the fields of managerial and financialaccounting. The paper also reviews the code of ethics established by the Institute of Managerial Accounting, which defines accounting ethics in terms of competence, confidentiality, integrity and objectivity, and the 2003 Sarbanes-Oxley law.
From the Paper "In contrast, the primary audience of managerial accountants is internal managers and decision makers. The viewpoint is forward-looking. Financial reports may differ wildly in terms of content and format, based on purpose. Managerial accountant may report on wide-ranging subjects such as costing, performance measures, opportunity costs and the like. As the audience has access to internal accounting information, the outputs of managerial accountants may include a great deal of non-financial information. "
Abstract The paper offers a brief description of the FinancialAccounting Standards Board, International Accounting Standards Board, the Governmental Accounting Standards Board and the Securities and Exchange Commission and how they set accounting standards throughout the industry. The paper posits that complying with the standards set forth by one or more agencies will provide a business with more efficient business practices as well as improved customer relations.
From the Paper "Accounting is of the most important elements of running an efficient and successful business. Without proper accounting practices in place, a company may have inaccurate records of who owes the company money, how quickly its equipment is depreciating, or how much money is being allocated to things like labor or materials. With this in mind, there is a generally accepted method of accounting which is known as the GAAP or the generally accepted accounting practices. Additionally, there are regulatory bodies in place to supervise accounting practices and be sure that they are done correctly."
