Earnings Management Pre-Sarbanes Oxley Scandals Backdating of Options Madoff 1 TW 5 Reliance on Accounting Numbers Critically analyse reliance on financial information What we will do this week Understand the concept of “quality” accounting information Develop the skills to know when and how to adjust current earnings for i f income not expected to persist t t dt i t Understand issues the financial analyst faces when dealing with retroactively restated financial statements Understand
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Topic 1 Examples document Draft Statement of Comprehensive Income for the year ended Profit or loss OCI Total Comprehensive Income $ Draft Statement of Changes in Equity for the year ended Opening equity i.e. from slide 46 = equity1 Closing equity i.e. from slide 46 = equity2 $ Example 2: A new accounting policy involving retrospective application Information:
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CHAPTER 9 ANALYSIS OF FOREIGN FINANCIAL STATEMENTS Chapter Outline I. Reasons to analyze financial statements of foreign companies include: • making foreign portfolio investment decisions‚ • making foreign merger and acquisition decisions‚ • making credit decisions about foreign customers‚ • evaluating foreign suppliers‚ and • benchmarking against foreign competitors. II. There are several problems an analyst might encounter in analyzing foreign financial statements‚ including:
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Statements of Financial Position Consolidated Statements of Earnings and Comprehensive Income / Consolidated Statements of Retained Earnings and Accumulated Other Comprehensive Income Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Directors and Officers Corporate Information 56 57 82 83 FINANCIAL HIGHLIGHTS Fiscal 2009 Results for the year (in millions) Total revenues Interest expense‚ net Earnings before non-operating activities‚ unusual items and income taxes
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Management’s earnings. They also incorrectly recorded liabilities‚ depreciation‚ salvage value of assets and the useful life of those assets to meet projected earnings. Buntrock was the driving force of the scandal. He set the projected earnings and encouraged the numbers to be manipulated to reach those earnings. Inaccurately lengthening the useful life of the garbage trucks and overstating the salvage value of them‚ in turn reduced the annual depreciation expenses‚ inflating earnings‚ accomplished
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sources such as Securities Exchange Commission (“SEC”) filings‚ and other periodical resources‚ I believe that red flags existed prior to the fraudulent schemes being uncovered. The senior management of the Xerox Corporation misled investors about earnings to meet Wall Street expectations and to boost the company’s stock price which in turn resulted in higher compensation and higher prices for personal sales of stock for the parties involved. One of the main fraudulent schemes that the company used
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Assignment 1 Review of Accounting Ethics Eric Christian Strayer University ACC-557 Winter 2013 Dr. Jacob Angima Assignment 1 Review of Accounting Ethics In the wake of recent‚ enormous corporate scandals and financial market upheavals‚ is the current business and regulatory environment more conducive to ethical behavior‚ or not? The answer is not that easy to arrive at‚ but there is evidence to say yes. Certainly‚ there has been an increase in awareness‚ vigilance‚ and disclosure. New
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auditing and other services. South Asset Management Co hired TWD‚ an accounting firm‚ to audit its financial statements for several years and then for an initial public offering of securities. The company understated its expenses and overstated its earnings by engaging in fraudulent capitalization practices for years. Reports showed that Southern Asset Management Co knew about these practices. TWD did not discover the true financial condition of South Asset Management; South Asset Management went
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Corporate scandals surrounding the turn of 21st century‚ creation of The Sarbanes and Oxley Act of 2002 and its effects on business environment. The opening years of the twenty-first century were very challenging to the US economy. Not only the stock market reached one of the lowest levels since the crisis of 1930‚ but also several high profile corporate scandals shook the public trust. Insider trading‚ fraudulent financial reporting and other illegal practices caused investors to question reliability
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Page 5.11-9 (c) These pre-tax earnings resulted from a transaction with an LJM1 affiliate related to Enron’s equity investment in Rhythms Netconnections‚ Inc. As previously stated‚ Enron now believes‚ based on current information‚ that the financial activities of the LJM1 affiliate should have been consolidated into its financial statements in 1999 and 2000 and will be restating prior years’ financial statements to reflect this change. The pre-tax earnings / (loss) impact of this transaction
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