What do Healy and Palepu propose as a remedy for the auditing process being reduced to a “complex checklist”?
What will be an ideal response?
ANSWER:
Healy and Palepu argue the auditing process has become a complex “checklist” which insulates the auditor from legal responsibilities for errors in the financial statements. They recommend that auditing firms make a professional judgment regarding the transparency of the financial statements, similarly to what is done by bond rating agencies. The stock exchanges would be involved to oversee the process. This should improve the quality of the information provided, though would likely also increase the cost of audits.
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Stock in Merlin Corporation is held equally by Jane, Eve, and Fred. Merlin seeks additional capital to buy a valuable tract of land that will cost $6,000,000. Jane, Eve, and Fred propose to loan Merlin $2,000,000 each, taking from Merlin a $2,000,000 10-year note with interest payable annually at five points above the prime rate. Merlin Corporation has current taxable income of $7,000,000. How are the payments on the notes treated for tax purposes?
What will be an ideal response?
When employees cannot work with management to make changes, they may engage in ________, taking their charges to the media in the hope that if the public learns about the situation, the organization will be forced to change.
A. whistle-blowing B. media manipulation C. benchmarking D. scapegoating E. progressive discipline
The declaration of a dividend will reduce net income
Indicate whether the statement is true or false
The organization that promotes improvement in quality worldwide is called the International Organization for Standardization
Indicate whether the statement is true or false