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How do you think accounting is relevant to your life or profession? Why is it required for your program of study?
1.3 Why does accounting rely on inexact or approximate measure?
1.5 The FASB’s conceptual framework set forth the Board’s views on which topics?
1.6 Use the web to find the home page of the PCAOB. What are the four primary activities of the PCAOB ?
1.8 List three professional certifications offered in accounting and the organizations that offer them.
1.10 List three accounting-related skills that are useful to many people in their personal lives.
E 1.2
Boeing Company is the largest manufacturer of commercial aircraft in the United States and is a major employer in Seattle, Washington. Explain why each of the following individuals or organizations would be interested in financial information about the company.
California Public Employees Retirement System, one of the world’s largest pension funds.
China Airlines, a rapidly growing airline serving the Pacific Rim.
Henry James, a real estate investor considering building apartments in the Seattle area.
Boeing’s management.
International Aerospace Machinists, a labor union representing many Boeing employees.
Match the term on the left with the descriptions on the right.
E 1.7
E 1.12
Audits of financial statements are an important part of the accounting process to ensure integrity in financial reporting.
What is the purpose of an audit?
As an external user of accounting information, what meaning would you attach to an audit that concludes that the financial statements are fairly presented in conformity with generally accepted accounting principles?
Would your interest in investing in this same company be affected by an auditor’s report that concluded the financial statements were not fairly presented? Why or why not?
E 1.14
Ethical conduct and professional judgment each play important roles in the accounting process.
In general terms, explain why it is important to society that people who prepare accounting information act in an ethical manner.
Identify at least three areas in which accountants must exercise professional judgment, rather than merely relying on written rules.
E 1.16
Locate the Home Depot, Inc., 2005 financial statements in Appendix A of this text. Briefly peruse the financial statements and answer the following questions:
Name the titles of each of Home Depot’s financial statements that provide specific information about economic resources, claims to resources, and changes in resources and claims.
Name three other sections from Home Depot’s 2005 financial statements that might be useful to a potential investor or creditor.
C 1.1
In the early 1980s, Chrysler Corporation was in severe financial difficulty and desperately needed large loans for the company to survive. What factors prevented Chrysler from simply providing potential lenders with misleading financial statements to make the company look like a risk-free investment?
C 1.3
You are employed by a business consulting firm as an information systems specialist. You have just begun an assignment with a startup company and are discussing with the owner her need for an accounting system. How would you respond to the following questions from the owner?
What is the meaning of the term accounting system?
What is the purpose of an accounting system and what are its basic functions?
Who is responsible for designing and implementing an accounting system?
C 1.4
Assume you have recently completed your college degree with a major in accounting and have accepted a position on the accounting staff of a large corporation. In preparing for your first day on the job, your supervisor suggests that you become familiar with the basic principles included in the code of ethics of the Institute of Management Accountants. Briefly explain what you learn as you study the code and how it might affect your behavior on your new job.
C 1.5
In 2001 and 2002, several accounting scandals were uncovered which resulted in very significant financial losses for investors and creditors of U.S. corporations. This led to legislation that placed the primary players in the financial reporting process, including reporting companies and their auditors, under closer government scrutiny. In a BusinessWeek article, “Annual Reports: Still Not Enough Candor,” dated March 14, 2003, author Mike McNamee raises the question, “Did corporate America get the message?”
McNamee goes on to state that he believes the answer to this question is “no.” He describes accounting practices that still result in vague information that does not meet the needs of financial statements users. He specifically cites the rules by which accountants count revenue as an example of an area where practices are inadequate, particularly in the high-tech, energy, pharmaceutical, and retail industries.
Instructions
Identify the objectives of external financial reporting discussed in this chapter. How would information that meets these objectives help investors make a decision concerning a potential investment in a company?
What institutional and other features that are part of the accounting profession are intended to enhance the integrity of financial reporting?
How do you thing accounting is relevant to your life or profession? Why is it required for your program of study? 1.3 Why does accounting rely on inexact or approximate measure ?
1.5 The FASB’s conceptual framework seta forth the Board’s views on which topic’s ?
1.6 Use the web to find the home page of the PCAOB. What are the four primary activities of the PCAOB ?
1.8 List three professional certifications offered in accouting and the organizations that offer them.
1.10 List three accounting-related skills that are useful to many people in their personal lives.