EBK FINANCIAL ACCOUNTING THEORY AND ANA
12th Edition
ISBN: 9781119299646
Author: CATHEY
Publisher: JOHN WILEY+SONS,INC.-CONSIGNMENT
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Chapter 1, Problem 1.6C
a.
To determine
Introduction: Accounting theories aims to set of principles and relationships so that observed practices and unobserved practices can be explained and predicted respectively.
To discuss: The conditions that caused changes in accounting and auditing professional’s roles.
b.
To determine
Introduction: Accounting theories aims to set of principles and relationships so that observed practices and unobserved practices can be explained and predicted respectively.
The major changes that occurred during financial crisis in early 2000s.
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During the early 2000s, the role of accounting and the auditing profession in the United States changed due to the discovery of several impactful accounting scandals. Using the Strayer Library, research the economic climate surrounding two accounting scandals.
What conditions caused accounting and the auditing profession's role to change during this time?
What major changes occurred as a result of the accounting scandals?
Accounting and ethics both played large roles in the last fiscal crisis and in many smaller scandals. How can knowledge of accounting help you guard against ethical lapses?
In 2001 and 2002 there were several high-profile US corporate collapses associated with misleading financial statements and accounting practices. Following these collapses, new laws were introduced to improve the quality of financial reporting.
a) In your opinion, will further regulation prevent deliberately misleading reporting? Explain.
b) Are additional laws likely to prevent corporate collapses? Why or why not?
c) How important is the enforcement of financial reporting requirements in promoting high quality reporting?
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EBK FINANCIAL ACCOUNTING THEORY AND ANA
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- Below are several statements about the Sarbanes-Oxley Act (SOX).1. SOX represents legislation passed in response to several accounting scandals in the early 2000s.2. The requirements outlined in SOX apply only to those companies expected to have weak internal controls or to have manipulated financial statements in the past.3. Section 404 of SOX requires both company management and auditors to document and assess the effectiveness of a company’s internal control processes that could affect financial reporting.4. Severe financial penalties and the possibility of imprisonment are consequences of fraudulent misstatement.5. With the establishment of SOX, management now has primary responsibility for hiring an external audit firm.6. The lead auditor in charge of auditing a particular company must rotate off that company only when occupational fraud is suspected.Required:State whether the answer to each of the statements is true or false.arrow_forwardInvestigations into the corporate scandals of the recent past revealed that the accountant did not question the ethical validity of the accounting transactions and practices that led to the accounting frauds and resulted in enormous loss to the public and damaged the image of accounting profession. Do you agree?. Give a detail account of how accountants facilitated some of the famous corporate scandals like the Enron.arrow_forwardRegarding Enron, this was a company that resulted in the creation of the Sarbanes-Oxley Act and many reforms to the accounting profession. Research the company and answer the following questions. Question 1: How did the members of the accounting firms violate the standards of integrity and credibility? Question 2: Do you believe the new standards that resulted from the Enron scandal to be adequate? Question 3: Name and explain two aspects of the Sarbanes - Oxley Act of 2002.arrow_forward
- What are some of the possible reasons for the numerous corporate accounting scandals discovered during 2001 and 2002?arrow_forwardIn thinking about overcoming the negative publicity and securities fraud fines related to revenue fraud, some companies succeed and move on, while others fail following the fraud. What forces might influence corporate “survivability” in the face of financial reporting fraud related to revenue?arrow_forwardWhy have there have been so many business scandals mentioned in the media over the past few years? Have companies simply gotten worse, or have people become more sophisticated in identifying improper activity? What is the role of the Accountant? Sarbanes-Oxley, for example, has placed much more responsibility on the CEO and corporate officers? Are there additional laws that should be considered to ensure these scandals do not continue to occur? Should non-executives be held liable for corporate wrongdoing? in 200 words, please.arrow_forward
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