21 May Complete the problem statement for your research effort. You should refine and thoroughly discuss the topic problem for your Term Paper and submit t
Week 3 Term Paper Submission
Complete the problem statement for your research effort. You should refine and thoroughly discuss the topic problem for your Term Paper and submit this documentation
ACCT601 Week 3 Lessen
An excellent example of the week 2 term paper
The Importance of Audit Planning
The article by Gartland (2017) highlights an important step in an audit process, planning. According to the article, audit planning is not a simple process. It involves consideration of client industry and regulatory factors, client operations and administration, availability and assignment of firm resources, engagement timing, and much more. In addition, the article touches on auditing standards established by the AICPA related to planning an external audit. Though this article is about four years old, it carries significance in today’s audit procedure.
Gartland, D. J., C.P.A. (2017). The importance of audit planning. Journal of Accountancy, 224(3), 14-15. https://www.proquest.com/trade-journals/importance-audit- planning/docview/1933270057/se-2?accountid=44759
Term Paper – Week 3 Requirement
Complete the problem statement for your course project. You should discuss the topic problem for your term paper and a minimum of three to five problems that you intend to research related to your topic.
Sample – Finalized Problem Statement
Problem Statement – There are three issues that arise with inventory management which are inventory obsolescence, inventory seasonality and inventory shortages/overages. Consignment inventory can help address the inventory issues listed above.
Sample – 3 to 5 problems
I intend to research the impact of inventory obsolescence when companies hold consignment inventory. I will be answering the question does consignment inventory alleviate the cost of inventory obsolescence? I intend to show the difference between companies that currently use consignment inventory and those who do not. I plan on showing which types of business have the greatest impact regarding inventory obsolescence.
I also intend to research the inventory management benefits regarding the usage of consignment inventory. I plan to answer the question does consignment inventory help manage inventory shortages or overages?
Another issue I plan to research is the impact of working capital (cash flow) when consignment inventory is utilized. There are three areas that affect working capital which is DSO (days sales outstanding) which is the inflow of cash, DIO (days inventory outstanding) how long is cash being used for inventory and DPO (days payable outstanding) which is the outflow of cash. I will discuss the favorability to working capital due to consignment inventory.
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FINANCIAL ACCOUNTING AND REPORTING 1
Week 3 Term Paper
DeVry University
Maria E. Paraskevopoulos
ACCT601
Professor: Ruizhen Hardin
Sep. 21, 2019
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FINANCIAL ACCOUNTING AND REPORTING 2
Financial Accounting adds value to companies in many ways. Accountants, CEO’s,
Managers, and other financial representatives are expected to perform an analysis of the
company’s financials and then report on the financial health of the company through Financial
Accounting and Reporting. It is expected that those representatives are competent and have the
appropriate knowledge and expertise to perform the analysis and give sound judgement. The
results of their representations are then formed into what is the 10k and 10q, reporting to
investors and others the financial health of the company. Unfortunately, the 10k and/or 10q may
not be sound and may lack negative information, such as decreased earnings or loses. The
misstatement of a company’s financials “can be classified as either fraudulent financial reporting
or misappropriation of assets, or both” (Mock, 2004). In an effort to reduce the potential of
fraudulent financial accounting and reporting; internal controls, internal and external auditing
and other forms of detection are put in place to produce sound financial reporting.
In the current financial and accounting landscape, accounting scandals are few and far
between and are caught relatively quickly. That wasn’t always the case. Before the Sarbanes-
Oxley Act of 2002, accounting scandals were so common that every day people started to believe
that this happened on a regular basis. In hindsight, it was select individuals within a company
that were deceitful, usually for their own gain so they can get paid their lavish bonuses. But
because of these scandals such as Enron and WorldCom in which auditing firms were part of the
scandal and tried to hide it, the accounting profession took a serious hit in terms of its integrity.
Common, every day people thought it was common practice and because of these scandals,
companies such as WorldCom and Enron are no longer in business and the account firm Arthur
Andersen are also no longer in business. People’s jobs were lost and the people who worked
every day for these companies ended up having to find new work. You see, the extremely large
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FINANCIAL ACCOUNTING AND REPORTING 3
majority of the workers at these companies and the auditors at Arthur Andersen are not to blame
for these scandals but really it was the actions of the few that affected the thousands.
Accounting is recognized to be the language of business. It is how investors, creditors,
and other companies gain a better understanding of the financial health of the company. It helps
investors to make a better decision of whether they want to invest their money into the company
or if they would rather not take that chance with the company based on its financial position,
past, current, and projected. Accounting helps creditors to determine whether they want to give
credit to a company or not based on whether they are projected to have returns and be able to pay
back the loan. It also helps other companies to compare themselves with other companies in
similar industries to see how they are doing in the market. “There are four major business values
contained in the various branches of accounting: planning, communicating, controlling, and
profit determination. Accounting information is helpful in communicating a company's current
status and its future plans to managers: the language of numbers is international and uniform
across all organizations” (What Is the Value of Accounting Functions in an Organization, 2019).
What caused these large accounting scandals and how were some of these companies
able to “hide” the truth from their investors? What was there to gain for performing these acts of
fraud and what were the consequences of the few? Besides the examples of larger companies
such as Enron and WorldCom, what were some of the common instances of fraud that have
happened in the business world? Does this happen globally or does it seem to center around the
United States?
How did Congress put a stop to these scandals and what was put into place to ensure that
companies will follow the rules? What was the Security and Exchange Commission’s
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FINANCIAL ACCOUNTING AND REPORTING 4
involvement before and after the Sarbanes-Oxley Act of 2002 was put into law? Going forward,
has there been any additional laws or acts proposed and accepted? Also, how has the SEC
impacted the accounting profession and what oversight does the SEC currently have?
Successful Financial Accounting and Reporting begins with management. A management
accountant’s role within the company is to ensure that financial information is disclosed timely
and accurately, so that investors, creditors, and others can make sound business decisions. “If
you are working as a Management Accountant, your role is critical to the success of any
organization” (Adding Value as a Management Accountant – Business Partnering, 2019). If
management is able to add value to the organization and perform up to expectations, they will
also have a seat at the table when it comes to making key business decisions within the company.
Sherman and Young did a great job informing their readers that there are two types of
misstatements that can occur in the financial statements, a misstatement or mistake or a
fraudulent act. Like anything, there is a potential for mistakes and errors can occur. This source
talks about how those errors can be either unintentional (mistake) or intentional (fraudulent). I
will use this source when discussing the difference between errors and fraud.
“A company’s financial conditions are of a major concern to investors and creditors. As
capital providers, investors and creditors rely on a company’s financial conditions for both the
safety and profitability of their investments. More specifically, investors and creditors need to
know where their money went and where it is now” (What Is the Importance of a Company's
Financial Statements, 2019). Chron did a good job at explaining the importance of being able to
rely on the financial statements of a company. Operating results, cash flows, and shareholder’s
equity are all key aspects of a company’s financials. Ensuring that these are accurate is critical
when investors, creditors, and other businesses are making key decisions.
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FINANCIAL ACCOUNTING AND REPORTING 5
These questions, and more, give insight into why the accounting scandals have opened up
the door to more SEC oversight as well as laws put into place to ensure that fair business
practices are being issued. No more are the days of old in which executives manipulated the
numbers for their own gain. Now, the executives are accountable for the results and
manipulating the numbers is becoming harder and harder to do. But with the accounting
scandals of the past, there has been some serious “renovations” being performed in the
accounting profession. For example, accounting firms can no longer be the sole owner of
performing the same client’s audit as well as consulting services. This stemmed from Enron in
which the auditing function of Arthur Andersen was afraid to let manager know about what the
consulting side of the business was doing and vice versa. Because of these renovations to the
accounting profession and now with more oversight from the SEC, the landscape of today’s
accounting field is vastly different from 15 years ago.
Misrepresentation of financials can also come in the form of fraud. Accounting fraud and
the implications of committing fraud can be life changing. In some cases, the accountant will
lose their license, no longer be allowed to practice, fined, thrown in jail, and lose their family. In
other cases, the accountant or fraudster could “get lucky” and get a job with the FBI or some
other government agency to help them learn how to detect and prevent the type of fraud they
committed.
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FINANCIAL ACCOUNTING AND REPORTING 6
Bibliography
Adding Value as a Management Accountant – Business Partnering. (n.d.). Retrieved September
8, 2019, from http://linkup.imanet.org/blogs/abraham-kulangara/2014/08/25/adding-value-as-a-
management-accountant-business-partnering?ssopc=1
Mock, J. M. (2004). Classic Case Studies in Accounting Fraud (Rep.). https://etd.ohiolink.edu/!
etd.send_file%3Faccession%3Dmuhonors1111004894%26disposition%3Dinline
What Is the Importance of a Company's Financial Statements? (n.d.). Retrieved September 7,
2019, from http://smallbusiness.chron.com/importance-companys-financial-statements-
21332.html
What Is the Value of Accounting Functions in an Organization? (n.d.). Retrieved September 07,
2019, from https://smallbusiness.chron.com/value-accounting-functions-organization-24616.html
Young, H. D. (2016, June 20). Where Financial Reporting Still Falls Short. Retrieved September
08, 2019, from https://hbr.org/2016/07/where-financial-reporting-still-falls-short
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