Introduction
The case centers on actual events that occurred in the Roman Catholic Archdiocese of New Orleans from 2001 to 2009. In 2008, the archdiocese announced that it had lost more than $100 million as a result of Hurricane Katrina — because insurance failed to cover all its property losses. Those losses had no bearing on the parish a closure, the church says. Not all the faithful are convinced. Later released prospectus indicated that the Archdiocese paid over $10 million directly from its own assets to settle claims of sexual abuse, and these payments were not part of financial statement or notes. Due to unauthorized expenditure parishioners and media questioned about Good Counsel’s. Good Counsel’s parishioners were very disappointed because they heard news about its closing. They didn’t accept clarification that is provided by archdiocese. They felt that Good Counsel’s was solvent so they wanted to close it for finance repairs.
1. What are generally accepted accounting principles (GAAP)? Has the Financial Report in Exhibit 3 been prepared in accordance with GAAP?
Generally accepted accounting principles (GAAP) are the standard structure of the guideline for financial accounting. GAAP contain balance sheet item sorting, share measurement and revenue recognition, organizations need to carefully scan their financial statement when they use GAAP. When accountants record and summarize financial statement, they need to apply these standards into their work. The Financial
g. On December 31, 2012, the company completed the work on a contract for an out-of-province company for $7,900 payable by the customer within 30 days. No cash has been collected and no journal entry has been made for this transaction.
The AICPA published the generally accepted auditing standards (GAAS). GAAS are those guidelines which auditors must follow while conducting an audit of a company's financial statements. It must also be stated in the audit report that the audit was conducted following GAAS.
1) Determining whether amounts are in conformity with generally accepted accounting principles addresses the proper measurement of assets, liabilities, revenues, and expenses, which includes all of the following EXCEPT the
B. An examination of financial statements and underlying records for conformance with generally accepted accounting principles (GAAP).
Student Cases with Solutions to accompany Accounting & Auditing Research: Tools & Strategies (7th edition)
The last GAAP is the consistency principle. The consistency principle suggests that once an organization agrees upon the utilization of an accounting principle or method, they should consistently use the same method for future fiscal years. This will provide a more accurate comparison for the individuals dealing with the massive amounts of numbers and transactions each fiscal year.
The documents that comprise GAAP vary in format, completeness, and structure. As a result, financial statement preparers sometimes are not sure whether they have the right GAAP; determining what is authoritative and what is not becomes difficult. In response to these concerns, the FASB developed the Financial Accounting Standards Board Accounting Standards Codification. The FASB’s primary goal in developing the Codification is to provide in one place all the authoritative literature related to a particular topic. Professional accountants pay for access to the FASB. The OU Accounting Department has paid for academic access to the FASB Codification. Our Login information is:
Although there are different areas of auditing, the standards apply in applicable situations. Auditors must be properly trained, plan accordingly, and remain objective in all situations. The standards of reporting portion of GAAS is primarily specific to a financial audit and lays down standard for how the audits should be conducted.
GAAP stands for Generally Accepted Accounting Principles. This is a key component to know in any business. GAAP is based on established concepts, objectives, standards and conventions to guide how financial statements are prepared and presented. GAAP’s objective is to provide information that is useful to investors, lenders, or others that provide resources to a company or not-for-profit organization. GAAP includes principles on a few things. One is recognition. Recognition is defined as what items are to be listed on the financial statements. This includes assets, liabilities, revenues and expenses. The next is measurement. This refers to the amounts that need to be reports of each part of the financial statement. Another is presentation. This refers to what is displayed and listed on the statement and how they are organized. And lastly there is disclosure. This includes the specific information that is the most important to the people that utilize the financial
22. If a parcel of land that was originally acquired for $85,000 is offered for sale at $150,000, is assessed for tax purposes at $95,000, is recognized by its purchasers as easily being worth $140,000, and is sold for $137,000, the land should be recorded in the purchaser 's books at:
As accountants and auditors we are held to, and must comply with, two standards of professional conduct. Those standards are generally accepted accounting principles (GAAP) and generally accepted auditing standards (GAAS). GAAP enforces the uniform standards for preparing and presenting financial statements. GAAS governs the ways and means are used by public accountants when conducting an audit. GAAS establishes the standards for field work and mandates that sufficient evidence be found to provide reasonable assurance for issuing an audit opinion.
GAAP (Generally Accepted Accounting Principles) determine the content and format of financial statements. SEC (Securities and Exchange Commission) requires publicly traded companies to issue annual audit. Concerns are about adequacy of disclosure; and behavioral implications are secondary.
The accrual basis of accounting conforms to the GAAP financial statements preparation provisions for external users. The US GAAP website describes financial guidelines, provides an understanding of the financial guidelines, and describes management's general flexibility. You must understand the flexibility in the GAAP standards and relate it to the individual company and its industry. Regulators view earnings quality as high when generally accepted accounting principles are adhered to.
Exhibit 2 and 3 showed the balance sheet and income statement of the Archdiocese of New Orleans. There are error in the balance sheet and income statement. In this balance sheet, shareholder equity was not mentioned, so it is very difficult to calculate the return on equity and debt to equity ratio. This information is very important, the organization need it to pay its debt in future. There are little ambiguities in the current assets and liabilities figure (doubtful receivables).
GAAP is exceptionally useful because it attempts to regulate and normalize accounting definitions, assumptions, and methods. Because of generally accepted accounting principles one is able to presuppose that there is uniformity from year to year in the methods that are used to prepare a