Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 6, Problem 17PC
To determine
Explain the manner in which the
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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?
An analyst assessed a company and determined the company reported a "high quality of earnings." This implies that
management issued a press release indicating it was not aware of any fraud during the current year.
the company’s management exercised little or no discretionary influence in reporting financial statement information to shareholders.
management has used its influence in determining the dollar amounts reported on financial statements.
income statement items reported during the current period can be expected to reflect future income levels.
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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Financial Reporting, Financial Statement Analysis and Valuation
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