Homer Winslow and Jane Alexander are discussing various aspects of the FASB’s concepts statement on the objective of financial reporting. Homer indicates that this pronouncement provides little, if any, guidance to the practicing professional in resolving accounting controversies. He believes that the statement provides such broad guidelines that it would be impossible to apply the objective to present-day reporting problems. Jane concedes this point but indicates that the objective is still needed to provide a starting point for the FASB in helping to improve financial reporting. Instructions a.    Indicate the basic objective established in the conceptual framework. b.    What do you think is the meaning of Jane’s statement that the FASB needs a starting point to resolve accounting controversies?

Accounting information provides useful information about business transactions and events. Those who provide and use financial reports must often select and evaluate accounting alternatives. The FASB statement on qualitative characteristics of accounting information examines the characteristics of accounting information that make it useful for decision-making. It also points out that various limitations inherent in the measurement and reporting process may necessitate trade-offs or sacrifices among the characteristics of useful information. Instructions a.    Describe briefly the following characteristics of useful accounting information. 1.    Relevance. 2.    Faithful representation. 3.    Understandability. 4.    Comparability. 5.    Consistency. b.    For each of the following pairs of information characteristics, give an example of a situation in which one of the characteristics may be sacrificed in return for a gain in the other. 1.    Relevance and faithful representation. 2.…

A BDO audit client subject to SEC independence rules make financial reporting software. The audit client wants BDO to become a reseller of their software. The terms would be the same as those offered to any other reseller. The relationship would be immaterial to both BDO and the client. Is this permitted under SEC rules? Yes, because it is immaterial to both parties. No, because reseller arrangements are business relationships and the SEC does not permit the audit firm to have a business relationship with an audit client. Yes, because BDO is not the only reseller and would be offered the same terms as any other reseller.

Which organization or group is the only one that “controls” the forensic accounting profession and its credentials? Group of answer choices ACFEI. AICPA. ACFE. NACVA. No one group “controls” the forensic accounting profession.

The Overstock-Grant Thornton dispute was publicly aired via disclosure statements filed with the SEC. What impact do you believe those disclosures had on the investing public's confidence in the financial reporting domain and the independent audit function? Were the interactions between Overstock and Grant Thornton unprofessional or otherwise inappropriate? Explain.

Assume that the FASB is considering revising an important accounting standard.Required:1. What constraint applies to the FASB’s consideration of whether to require companies to provide new information?2. In what Concepts Statement is that constraint discussed?3. What are some of the possible costs that could result from a revision of an accounting standard?4. What does the FASB do in order to assess possible benefits and costs of a proposed revision of an accounting standard?

Which of the following statements relating to the role ofprofessional judgment in the financial reporting process is(are) true?a. Different accountants may evaluate similar situationsdifferently.b. The determination of which items should be disclosedin notes to fi nancial statements requires professionaljudgment.c. Once a complete list of generally accepted accountingprinciples is prepared, judgment by accountants will nolonger enter into the fi nancial reporting process.d. The possibility exists that professional judgment latermay prove to have been incorrect.

Relevance versus Faithful RepresentationYou are listening to two accounting majors, both of whom are seniors.They are debating the merits of having relevant versus faithfullyrepresented accounting information for external decision making. One student states, "In my decision making, if given a choice betweenrelevant and representationally faithful accounting information, I wouldprefer to have relevant information." The other student replies, "Nonsense! If you cannot rely on the information, then of what use is it?"Required: Based on your knowledge of the FASB's Conceptual Framework, define the qualitative characteristics of relevance and faithful representation.Include definitions of the ingredients of each. Which do you think ismore important?

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Smith CPAs have requested that an audit client add a note disclosure to the financial statements related to their ability to operate as a going concern. The client has refused to do so; citing differences in opinion on some key loans that they believe will be refinanced. What should the auditors do at this point? The auditors should request a meeting with the client's board of directors, and discuss the issue with them. The auditors should consider modifying the opinion for a material departure. The auditors should consider disclaiming an opinion on the financial statements to preserve the reputation of the firm. The auditors should consider issuing a scope limitation, on the basis that management is not willing to make the necessary amendment.