Explain the problems associated with inappropriate accounting practices
The use of inappropriate accounting techniques is a characteristic common to many financial statement fraud schemes. Enron made elaborate use of Special Purpose Entities (SPE) to hide liabilities through off balance sheet accounting. WorldCom management transferred transmission line costs from current expense accounts to capital accounts. This allowed them to defer some operating expenses and report higher earnings. Also, they reduced the book value of hard assets of MCI by $3.4 billion and increased goodwill by the same amount. Had the assets been left at book value, they would have been charged against earnings over four years. Goodwill, on the other hand, was amortized over much longer period.
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Which of the following is the best argument against the use of negative accounts receivable confirmations?
A. Recipients are likely to feel that, in reality, the confirmation is a subtle request for payment. B. There is no way of knowing if the intended recipients received them. C. The inference drawn from receiving no reply may not be correct. D. The cost-per-response is excessively high.
Which of the following statements is false regarding absorption costing?
A) Variable overhead is treated as a product cost. B) Absorption costing is required for external financial statements prepared in accordance with generally accepted accounting principles (GAAP). C) Fixed manufacturing overhead is treated as a product cost. D) Fixed manufacturing overhead is expensed in the period incurred.
Which of the following is an advantage of face-to-face meetings??
A) They provide direct human contact.? B) ?They allow companies to reduce travel budget. C) ?They restrict dominance by high-status members. D) ?They minimize the environmental impact caused by travel.
Currency swaps are often used to provide long-term financing in foreign currencies because
A) longterm capital markets are not well developed. B) longterm forward foreign exchange markets are absent. C) of high foreign taxes. D) both A and B