ACC305 Wk 1 DQ1 FASB and Ethics
ACC305 Wk 1 DQ1 FASB and Ethics fin571
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Date Created: 11/09/15
Research Case 13 page 45 The purpose of this case is to introduce you to the information available on the website of the Financial Accounting Standards Board FASB Required Access the FASB home page on the Internet The web address is wwwfasborg Answer the following questions 1 Describe the mission of the FASB 2 Who are the current Board members Brie y describe their backgrounds 3 How are topics added to the FASB s technical agenda Research Case 13 Requirement 1 The mission of the Financial Accounting Standards Board is to establish and improve standards of financial accounting and reporting for the guidance and education of the public including issuers auditors and users of financial information Requirement 2 Board members are appointed for fiveyear terms and are eligible for reappointment to one additional fiveyear term Expiration dates on June 30 of current terms are indicated Leslie F Seidman Chairman 2013 Daryl E Buck 2015 Russell G Golden 2012 Thomas J Linsmeier 2016 R Harold Schroeder 2015 Marc A Siegel 2013 Lawrence W Smith 2012 Requirement 3 The FASB receives many requests for action on various financial accounting and reporting topics from all segments of a diverse constituency including the SEC The auditing profession is sensitive to emerging trends in practice and consequently it is a frequent source of requests Overall requests for action include both new topics and suggested review or reconsideration of existing pronouncements The FASB is alert to trends in financial reporting through observation of published reports liaison with interested organizations and from recommendations from and discussions with the Emerging Issues Task Force In addition the staff receives many technical inquiries by letter and by telephone which may provide evidence that a particular topic or aspect of an existing pronouncement has become a problem The FASB also is alert to changes in the financial reporting environment that may be brought about by new legislation or regulatory decisions The Board turns to many other organizations and groups for advice and information on various matters including its agenda Among the groups with which liaison is maintained are the Financial Accounting Standards Advisory Council the Accounting Standards Executive Committee and Auditing Standards Board of the AICPA and the appropriate committees of such organizations as the Association for Investment Management and Research Financial Executives Institute Institute of Management Accountants and Robert Morris Associates Ethics Case 18 page 46 It is the responsibility of management to apply accounting standards when communicating with investors and creditors through nancial statements Another group auditors serves as an independent intermediary to help ensure that management has in fact appropriately applied GAAP in preparing the company39s nancial statements Auditors examine audit nancial statements to express a professional independent opinion The opinion re ects the auditors39 assessment of the statements39 fairness which is determined by the extent to which they are prepared in compliance with GAAP Some feel that it is impossible for an auditor to give an independent opinion on a company39s nancial state ments because the auditors39 fees for performing the audit are paid by the company In addition to the audit fee quite often the auditor performs other services for the company such as preparing the company39s income tax returns Required How might an auditor39s ethics be challenged while performing an audit Ethics Case 18 Discussion should include these elements Auditors39 Role in Examining Financial Statements The function of the auditor is to assure the fairness of financial statements and their compliance with GAAP not the verification of account correctness As some items in financial statements are the result of estimates auditors are unable to provide an opinion as to the exactness of an entity39s financial position Auditing Standards suggest that quotpresent fairlyquot correlates to presenting financial information that is believable reliable and not misleading to users of the financial statements An auditor must provide an independent opinion on an entity39s financial statements even though the entity pays the audit fee and the audit company performs other services such as the preparation of tax returns Sarbanes Oxley significantly restricts the additional services that an auditor can perform for an audit client Who is affected Auditors Company management Company employees and labor unions Current and future shareholders Creditors Financial analysts Government entities Society in general Ethical Values Ethical values pertaining to auditor responsibility include honesty integrity and service to the public lack of bias independence in attitude as well as appearance and quality of work in conducting the audit The AICPA and most state Rules of Conduct demand these qualities of public auditors Ethical issues or challenges 1 Pressure from management to bias the audit opinion by threatening to withhold audit fee payment to hire another audit firm or to assign taX preparation work to another audit firm Pressure from management to bias the audit opinion by providing an expensive gift or an outright bribe to the auditor Auditors should refuse all but nominal gifts from their clients Pressure to bias the audit opinion in favor of the client because the auditor or family member has a financial interest in the client beyond the audit fee The interest could be in the form of an investment or a loan to or from the client Pressure to bias the audit opinion in favor of the client because the auditor or family member has current or future employment or is in a position of in uence with the client An unfavorable opinion may provoke a lawsuit by investors and other injured parties against both the company and the auditors Fear of litigation may prompt the auditors to give a favorable or clean opinion when misleading information exists in the financial statements
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