ACCT 6300 Final Exam Review Instructor written questions

1. ACCT 6300 Final Exam Review Instructor written questions Audio Clip Link: http://breeze.uhv.edu/p94729733/

2. Chapter 5 • Auditors’ Report • Ten GAAS: TIP PIE ACDO • Types of Fraud and the fraud triangle:

3. Auditors’ Report • Five types of opinions • standard unqualified • modified unqualified • ANGEL modifications still provide an unqualified opinion • Qualified: Material GAAP or GAAS problem • Disclaimer: highly material GAAS problem • Adverse: highly material GAAP problem

4. Auditors’ Report • Auditors’ Report • Three standard paragraphs for standard unqualified opinion: introductory, scope and opinion. • An explanatory paragraph (or languages) will be added if a standard unqualified opinion cannot be expressed. • Position of the explanatory paragraph • For qualified or adverse opinion: before the opinion paragraph • For modified unqualified opinion: after the opinion paragraph • However, the explanatory paragraph can be either before or after the opinion paragraph: (a) Necessary GAAP Departure,and (b) Emphasis of a matter.

5. Ten GAAS Mnemonics per Becker CPA review: TIP PIE ACDO • Three general standards (TIP): • Training • Independence • Professional Care • Three field work standards (PIE): • Planning and Supervision • Internal Control • Evidence • Four reporting standards (ACDO) • Accounting=GAAP • Consistency • Disclosure • Opinion

6. Accounting Fraud • Types of Fraud • fraudulent financial reporting (lying); • asset misappropriation (stealing); • corruption (cheating) • Fraud triangle • pressure/incentive; • opportunity; • rationalization/attitude

7. Chapter 6 • Auditors’ legal liability (exhibits 6.1 and 6.2 ; my extra notes) • Regulatory obligations (general requirements)

8. Auditors’ legal liability • An auditor(accountant) could be held liable for : • breach of contract: privity relationship. • ordinary negligence: missed certain information or omitted a certain procedure • gross negligence/constructive fraud: did not pay even minimal care, fail to follow GAAS/GAAP • fraud: fraudulent or deceitful behavior or actions • Disputes exist regarding whether an auditor (accountant) should be liable for a third party for ordinary negligence. Under common law, the courts have applied different approaches (exhibit 6.2) • Four approaches adopted in four classic court cases • privity<near privity<foreseen<reasonably foreseeable

9. Statutory laws • Securities Act of 1933: IPO • Securities and Exchange Act of 1934: subsequent trading • Annual financial statements should be audited and quarterly financial statements are reviewed • Insider trading: • directors, officers, and >10% shareholders should register with SEC and report their trading • Other laws: PSLRA, SOX, FCPA, and RICO (just need to briefly know)

10. Chapter 7 • Earnings management (EM) • inflate/deflate Earnings or EPS • Materiality • quantitative and qualitative factors • Restatements • voluntary or requested by SEC • 7 common EM techniques (Shenanigans)

11. 7 common EM techniques • Recording Revenue too soon or of questionable quality • Recording bogus revenue • Boosting income with one-time gains • Shifting current expenses to a later or earlier period • Failing to record or improperly reducing liabilities • Shifting current revenue to a later period • Shifting future expenses to the current period as a special charge Items 1-5: inflate earnings through overstatement of revenue and assets (1-3), or understatement of expense and liabilities (4 and 5). Items 6-7: deflate earnings through understatement of revenue or overstatement of expense.

12. Chapter 8 • GAAP vs. IFRS • Rule vs. principle-based standards • CG worldwide • Germany, China, India • IFCA code vs. AICPA code of professional conduct: quite similar • Differences between international and US audit report • True and fair vs. Present Fairly