Concept explainers
(a)
Financial Aid: It refers to a grant provided by state, federal government school, colleges, foundations, and corporations in the form of scholarship, loan or paid employment for helping the students in meeting their studying fees.
Earnings Management: It refers to the practice of adopting certain accounting strategies and techniques which would make a company’s financial position look better and positive to its users of the financial information.
To discuss: whether each of the given actions to increase the chances of receiving financial aid is ethical.
(b)
To explain: the reasons for a company to want to overstate its earnings.
(c)
To explain: the reasons for a company to want to understate its earnings.
(d)
To state: the circumstances under which an otherwise ethical person might decide to illegally overstate or understate earnings.
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Check out a sample textbook solutionChapter 1 Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
- Consider the dilemma you might someday face if you are the chief financial officer of a company that is struggling to maintain a positive cash flow, despite the fact that the company is reporting a substantial positive net income. Maybe the problem is so severe that there is often insufficient cash to pay ordinary business expenses, like utilities, salaries, and payments to suppliers. Assume that you have been asked to communicate to your board of directors about your companys year, in retrospect, as well as your vision for the companys future. Write a memo that expresses your insights about past experience and present prospects for the company. Note that the challenge of the assignment is to keep your integrity intact, while putting a positive spin on the situation, as much as is reasonably possible. How can you envision the situation turning into a success story?arrow_forward(This is about Accounting Information System.) 1. Distinguish between ethical issues and legal issues. 2. When a company has a strong internal control structure, stockholders can expect the elimination of fraud. Comment on the soundness of this statement. 3. Distinguish between employee fraud and management fraud. 4. Discuss the Sarbanes-Oxley Act. Please provide me a correct answer and PLEASE ANSWER ALL THE QUESTIONS NOT JUST ONE QUESTION. Thank you!arrow_forwardWhy is it necessary to have accounting standards? O A. so managers in the company can control the company's finances O B. to prevent people outside the company from examining the company's finances O C. to make it impossible to compare one company's finances with those of another O D. so all companies use the same methods for recording financial transactionsarrow_forward
- D1. You read that there is no generally accepted definition of ‘earnings management’. Using your accounting knowledge, your own research and textbook reading to define, describe, and analyze: When will earnings management be acceptable? When will earnings management become a fraud? Fraudulent earnings management is often identified by two adjectives. What are the two adjectives?arrow_forward(This is about Accounting Information System.) 1. Distinguish between ethical issues and legal issues. 2. When a company has a strong internal control structure, stockholders can expect the elimination of fraud. Comment on the soundness of this statement. 3. Distinguish between employee fraud and management fraud. 4. Discuss the Sarbanes-Oxley Act. Please provide me a correct answer. Thank you!arrow_forwardAn ethical problem may arise for a company expert who is trying to address the needs of people who are interested in financial information.arrow_forward
- 20)Which of the following is the best definition of an internal user of accounting information? A) Creditors, such as banks, that use accounting information to evaluate the risk of lending money B) Investors who use accounting information to decide whether to buy or sell stock C) Managers who use accounting information to plan, organize, and run a business D) Labor unions who use accounting information to examine the ability of the company to pay increased wages and benefitsarrow_forwardBusiness damages, as a result of financial fraud, directly impact the operations of any company. What can be, some of the commercial damages resulting from financial fraud? What methods can you use to assess the damages caused by financial fraud? How do generally accepted accounting principles help prevent financial statement fraud?arrow_forwardMr. Bader is leaving the accounting practice to become the Finance Director of a client company. The ethical dilemma he is most likely to face would be a. Objectivity b. Integrity c. Professional Behavior d. Confidentialitarrow_forward
- Do some research (use sources other than your prescribed textbook) and explain why it is important for businesses to have ethical standards and codes of conduct for financial managers.Include another example where poor ethical practices by people in a management or trust position have led to significant losses.arrow_forwardBusiness damages, as a result of financial fraud, directly impact the operations of any company. Under this premise: What can be, in your opinion, some of the commercial damages resulting from financial fraud? What methods can you use to assess the damages caused by financial fraud? How do generally accepted accounting principles help prevent financial statement fraud?arrow_forwardWhat has been the main thrust of recent changes in the financial reporting rules following the financial scandals of Enron, Worldcom, etc.? Multiple Choice To improve internal control over companies' financial reporting. To add to the work of the companies' external accountants. To force the companies to disclose more of their internal information. To provide incentives to increase their net income. < Prev 27 of 50 Nextarrow_forward
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