scholarly journals Auditor’s Duty to Ensure Clients are Using Accounting Practices in Compliance with Generally Accepted Accounting Principles: A Case Study of Infinity Business Group, Inc.

2021 ◽  
Vol 06 (07) ◽  
Author(s):  
Stephen Errol Blythe ◽  
Keyword(s):  
Business Group ◽  
District Court ◽  
Securities Fraud ◽  
Fiduciary Duties ◽  
Generally Accepted Accounting Principles ◽  
Accounts Receivable ◽  
Accounting Practice ◽  
Accounting Principles ◽  
A Company

Infinity Business Group, Inc. (IBG), a company specializing in the collection of bad checks, was incorporated in 2003. IBG recorded its collection fees as Accounts Receivable even before the Not-Sufficient-Funds checks were collected, a method not in compliance with Generally Accepted Accounting Principles; accordingly, IBG’s auditor should not have issued unqualified opinions on the financial statements during 2003-2008. A $23 million write-off of Accounts Receivable in 2009 had a devastating effect on the company and it declared bankruptcy in 2010. In 2019, the Bankruptcy Court ruled: (a) the auditor’s unqualified opinions violated the U.S. Securities Exchange Act, and the auditor was forced to plead guilty to one felony count of securities fraud; (b) IBG’s CFO was dishonest when he responded to an inquiry from a lender about the Accounts Receivable; (c) Morgan Keegan & Company, Inc. (MK), a brokerage and investment banking firm contractually affiliated with IBG, encouraged IBG to discontinue using the improper accounting method; (d) IBG’s President Cordell made a misrepresentation to MK in 2007 when he stated that all of the questionable Accounts Receivable had been written off; (e) in 2008, MK became aware that IBG might change the accounting method; (f) MK never encouraged IBG managers to breach fiduciary duties to IBG; (g) MK did not owe IBG fiduciary duties, but even if it did, there is no evidence of a breach because MK encouraged discontinuance of the improper accounting practice; (h) some of the managers and directors of IBG were innocent, they did not participate in daily operations of the company, and they did not have control of the company; and (i) notwithstanding the fact they did not commit securities fraud, some of the “innocent” managers and directors failed to discharge their duties to IBG by advocating for the continued use of the improper accounting method. On appeal in 2021, the District Court affirmed the Bankruptcy Court, holding that: it did not make any legal errors; the Bankruptcy Trustee did not adequately prove damages caused by MK; and the Bankruptcy Trustee’s claims were barred by the Doctrine of in Pari Delicto.

scholarly journals We Are Not Publicly Traded And So The Rules Dont Apply Or Do They Should They?

2011 ◽  
Vol 8 (1) ◽  
pp. 103-106
Author(s):  
Kelly Noe
Keyword(s):  
Publicly Traded ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
A Company ◽  
Privately Held

This paper presents a case study of the accounting practices of a company that is privately held. The company follows Generally Accepted Accounting Principles (GAAP) but has some questionable transactions. The paper then follows up with a discussion of baby-GAAP and possible consequences of two different GAAP options.

scholarly journals Auditors’ Duty to Respond to “Red Flags” Indicative of Overvaluation of Inventory: A Case Study of Sanchez v. Deloitte & Touche

2021 ◽  
Vol 04 (08) ◽  
Author(s):  
Stephen Errol Blythe ◽  
Keyword(s):  
Control System ◽  
Internal Controls ◽  
Red Flags ◽  
Securities Fraud ◽  
Securities Litigation ◽  
Accounting Principles ◽  
Legal Case ◽  
Legal Justification ◽  
The Impact

This is a legal case study of Sanchez v. Deloitte & Touche. It covers: (a) legal elements of a securities fraud claim; (b) the effect of the Private Securities Litigation Reform Act upon the pleading of an auditor’s complicity in securities fraud; (c) how SEC Rule 10b-5 affects auditors; (d) potential red flags pertaining to an audit client’s deficient inventory control system; (e) the failure of a client’s internal controls to detect a gross overvaluation of inventory; (f) the failure of an auditor to ensure that the client’s inventory is valued at the lower of cost or market, as required under General Accepted Accounting Principles; (g) the court’s decision as to whether the auditor in this case was liable for complicity in securities fraud, the court’s legal justification for the decision, and the impact of the red flags on the court’s decision.

scholarly journals US GAAP Conversion To IFRS: A Case Study Of The Balance Sheet

2013 ◽  
Vol 9 (2) ◽  
pp. 133-140
Author(s):  
Peter Harris ◽  
Liz Washington Arnold
Keyword(s):  
Financial Market ◽  
Financial Analysis ◽  
Balance Sheet ◽  
The United States ◽  
Generally Accepted Accounting Principles ◽  
International Reporting ◽  
Accounting Principles ◽  
The World ◽  
Us Gaap

International Reporting Standards (IFRS) has become the required framework for most of the world financial market economies. In the United States, US Generally Accepted Accounting Principles (GAAP) is still required. However, plans are presently in place by the SEC to abandon US GAAP and to adhere to IFRS requirements by as early as the period ending December 31, 2014. This case study requires the student to transform a US GAAP presented Balance Sheet to IFRS and is most suitable for an Intermediary Accounting 11 and a Financial Analysis class at the graduate level.

scholarly journals iRobot Corporations Intellectual Property: Accounting For Research And Development Under U.S. GAAP Versus IFRS

2013 ◽  
Vol 9 (4) ◽  
pp. 321-332 ◽  
Author(s):  
Robert M. Bowen ◽  
Jane Jollineau ◽  
Loren Margheim
Keyword(s):  
Intellectual Property ◽  
Research And Development ◽  
Financial Reporting ◽  
Real World ◽  
Reporting Standards ◽  
Rule Based ◽  
Generally Accepted Accounting Principles ◽  
Financial Reporting Standards ◽  
Accounting Principles

Founded by MIT scientists in 1990, iRobot Corporation designed, developed, and sold consumer and military robots to help people complete dull, dirty or dangerous tasks in real-world situations. The purpose of this case study is to stimulate discussion about intellectual property and how it should be measured and reported. Under U.S. generally accepted accounting principles (GAAP), iRobot reported no asset related to their internally generated intellectual property despite over 20 years of intensive research in robotics. In contrast, international financial reporting standards (IFRS) permitted firms to treat certain research and development (R&D) activities as an asset. By comparing U.S. GAAP and IFRS treatments of R&D, we provide an interesting example of the range of potential financial reporting effects across alternative accounting methods. Further, the case requires that students wrestle with the implications of moving from more rule-based accounting (U.S. GAAP) to more principles-based accounting (IFRS). How might U.S. managers, auditors, and investors likely respond? A teaching note is available.

scholarly journals Analisis Penerapan Cost Recovery Method Dan Percentage Of Completion Method Berdasarkan PSAK 34 Terhadap Laba Kotor Perusahaan PT Mitra Menara Mandiri

2018 ◽  
Vol 6 (2) ◽  
pp. 104-109
Author(s):  
Jhonatan Andres ◽  
Robert Pius Pardede
Keyword(s):  
Cost Recovery ◽  
Recovery Method ◽  
Generally Accepted Accounting Principles ◽  
Accounts Receivable ◽  
Construction Company ◽  
Construction Companies ◽  
Accounting Principles ◽  
Completion Process ◽  
The Cost ◽  
Selection Of

Economic in Indonesia is growing rapidly. One of the supporting factors economic development in Indonesia is the construction field which is growing from year to year. The construction completion process carried out by a construction company has a different period of time depending on the request of the employer. The construction companies measure their gross profit by using the percentage settlement method or the recovered cost method depends on the contract. In general, the contractor company is still wrong in using these methods so that the company does not know clearly the gross profit obtained.The purpose of this study was to determine the recognition of gross profit by applying the recoverable cost method and the percentage of completion method of PT Mitra Menara Mandiri and knowing the factors that influence the selection of methods in the recognition of gross profit using the percentage settlement method and the recoverable cost method at PT Mitra Menara Mandiri.The results of the analysis of the implementation of the cost recovery method and the percentage settlement method of the company's gross profit at PT Mitra Menara Mandiri are still not in accordance with generally accepted accounting principles in terms of determining the recognition of the revenue applied. There is a weakness in the company in recording journals, such as the company does not record business journals when receiving a job and the company does not record if the company conducts billing terms. Therefore, the company should at the time of conducting the billing the company records the journal and records the accounts receivable journal at the time of receiving the job to avoid losing data at the time PT Mitra Menara Mandiri receives cash on the receivables that have been billed.

scholarly journals Professionalism, Leadership Style, Understanding of Governance and Role of Supervision in Affecting Auditor Performance

2020 ◽  
Vol 8 (1) ◽  
pp. 11-18
Author(s):  
Kautsar Riza Salman ◽  
Devi Saidul Hatta
Keyword(s):  
Data Analysis ◽  
Linear Regression ◽  
Leadership Style ◽  
Financial Statements ◽  
External Factors ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
Regression Test ◽  
A Company

Auditors’ performance in general is the result of an objective audit assignment towards the financial statements of a company or other organization in order to determine whether the financial statements have been fairly presented in accordance with generally accepted accounting principles. This study aims to determine the effect of professionalism, leadership style, understanding of governance, and the role of supervision of auditor performance. This study uses a questionnaire filled out by BPKP government auditors in East Java Province. Data analysis from this study uses multiple linear regression test using SPSS 23 program. This study found that only professionalism influences auditor performance. This result implies the importance of professionalism of the auditors because it can affect performance. The results of the study also imply that external factors such as leadership style, understanding of governance, and the role of supervision are not important factors in influencing auditor performance.

scholarly journals Third Party Legal Protection in the Cooperation Agreement for Purchasing Company Assets (Analysis of the Decision of the Mataram High Court Number: 10 / PDT / 2018 / PT. MTR)

2019 ◽  
Vol 6 (4) ◽  
pp. 15
Author(s):  
Michael Anshori ◽  
Zainal Asikin ◽  
Djumardin Djumardin
Keyword(s):  
Wildlife Conservation ◽  
Legal Protection ◽  
Third Party ◽  
District Court ◽  
Cooperation Agreement ◽  
Conceptual Approach ◽  
High Court ◽  
Study Approach ◽  
A Company

This study aims to determine the legal protection of third parties and analyze the legal protection of the parties and the position of the parties in the Cooperation agreement to purchase assets of companies owned by PT. Wildlife Conservation. This type of research is normative legal research, with the approach used is the legislative approach, conceptual approach and Case study approach. Position of the parties in the Cooperation agreement to purchase assets of a company owned by PT. Biodiversity Tourism, in the Deed of Cooperation Agreement Number 81. Based on the Deed of the Cooperation Agreement the Rights and Obligations of the Parties are subject to the Agreement made by the parties before a Notary. Because of the third party's legal protection in the Cooperation Agreement No. 81 is not contradictory to the provisions of Article 1338, then legally it is the legal basis for filing a default lawsuit at the Mataram District Court, the Mataram High Court.

The Nexus of State and Local Capacity in Vertical Policy Diffusion

2017 ◽  
Vol 48 (2) ◽  
pp. 188-200 ◽  
Author(s):  
Junghack Kim ◽  
Bruce D. McDonald ◽  
Jooho Lee
Keyword(s):  
Local Government ◽  
Local Governments ◽  
Local Level ◽  
Policy Diffusion ◽  
Institutional Autonomy ◽  
Vertical Diffusion ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
State And Local

This article examines the vertical diffusion of a policy between a state and its local governments. Although policy diffusion typically relies upon multiple mechanisms, diffusion between a state and its local governments relies primarily on coercion. Using a case study of state-mandated adherence to Generally Accepted Accounting Principles (GAAP), we show that the coercion mechanism is dependent upon the capacity of the state and local governments to adopt and implement a policy, as well as the discretion available to a local government. Utilizing data from all 50 states as of 2008, our findings show that the vertical diffusion of a policy is reliant on a state’s fiscal capacity and the personnel capacity of the local government. We also found that strong institutional autonomy at the local level leads a state to adopt a GAAP mandate.

scholarly journals US GAAP Conversion To IFRS: A Case Study Of The Income Statement

2012 ◽  
Vol 8 (4) ◽  
pp. 409-416
Author(s):  
Peter Harris ◽  
Liz Washington Arnold
Keyword(s):  
Financial Market ◽  
Financial Analysis ◽  
The United States ◽  
Generally Accepted Accounting Principles ◽  
International Reporting ◽  
Accounting Principles ◽  
Income Statement ◽  
The World ◽  
Us Gaap

International Reporting Standards (IFRS) has become the required framework for most of the world financial market economies as of January 1, 2011. In the United States, US Generally Accepted Accounting Principles (GAAP) is still required. However, plans are presently in place by the SEC to abandon US GAAP and to adhere to IFRS requirements by as early as for the period ending December 31, 2014. This case study requires the student to transform a US GAAP presented Income Statement to IFRS. This case study is most suitable for an Intermediary Accounting or a Financial Analysis class at the graduate level.

scholarly journals Политика финансијског извештавања предузећа као инструмент креирања вредности за aкционаре // Financial reporting policy as tool for creating value for stockholders

2013 ◽  
Vol 11 (19) ◽  
pp. 201
Author(s):  
Бојан Савић
Keyword(s):  
Financial Reporting ◽  
Capital Market ◽  
Financial Statements ◽  
Business Owners ◽  
Management Tool ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
Commercial Market ◽  
A Company ◽  
Entire Economy

Резиме: Процес финансијског извештавања одавно је прерастао оквире рачуноводствене функције предузећа. Реч је о важном инструменту менаџмента који служи не само полагању рачуна, већ и комуницирању са инвестиционом заједницом у циљу креирања финансијске репутације предузећа. Финансијско извештавање доприноси ефикасности тржишта капитала, што је предуслов развоја целокупне привреде. Отуда се у савременим тржишним условима финансијско извештавање од стране менаџмента никако не сме посматрати искључиво као нормативно наметнутна обавеза. Политика финансијског извештавања представља скуп инструмената који су усмерени на циљно обликовање финансијских извештаја. Другим речима, садржина и форма финансијских извештаја прилагођавају се дефинисаним циљевима предузећа. Важно је међутим напоменути да се целокупан процес одвија у складу са позитивном законском регулативом, општеприхваћеним рачуноводственим принципима и МСФИ. У супротном, не би се могло говорити о легалним радњама, већ о кривотвореном финансијском извештавању. Циљ овог написа је да укаже на домете политике финансијског извештавања у креирању, управљању и одржању вредности за власнике предузећа. Наиме, стратегије, циљеви и политике предузећа своју верификацију имају управо на тржишту. Кроз активности на комерцијалном тржишту предузеће креира вредност. Међутим, тестирање вредности врши се на тржишту капитала. Значај финансијског извештавања рефлектује се на оба наведена тржишта.Summary: Financial reporting process has long outgrown the framework of accounting functions of the сompany. It is an important management tool that serves not only accountability, but also communicating with the investment community in order to create financial reputation of the company. Financial reporting contributes to the efficiency of capital markets as a precondition for development of the entire economy. Hence, in the contemporary market economy financial reporting by management can not be seen solely as normative the imposed obligations. Financial reporting policy is a set of tools aimed at the target format of the financial statements. In other words, the content and form of financial statements, adjusted to the defined goals of a company. It is important however to note that the entire process is carried out in accordance with current legislation, generally accepted accounting principles and IFRS. Otherwise, you would not be able to talk about the legal action, but a counterfeit financial reporting. The aim of this paper is to highlight the achievements of the policy of financial reporting in the creation, management and maintenance of value for business owners. Specifically, strategies, objectives and policies of the company verifying their right to have a market. Through the activities of the commercial market enterprise creates value. However, testing is done on the value of the capital market. The importance of financial reporting is reflected in both these markets.

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