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?
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?
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.
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?
The Internet is a good place to get information that is useful to you in your study of accounting. For example, you can find information about current events, professional accounting organizations, and specific companies that may support your study.
Instructions
Access the Rutgers University Internet site. Look under the category “Accounting Resources.” Identify eight links to many other sites that provide information about accounting.
Look under the category “Accounting Resources” and then “Big-Five.” Identify the names of the largest public accounting firms.
Under “Accounting Resources,” look under the category “Publishers” and then the subcategory of “U.S. Accounting Publishers” to locate the publisher of this textbook.
Find the Internet sites of the following professional accounting organizations and learn what you can about them from the information provided:
American Accounting Association (AAA)
Financial Accounting Standards Board (FASB)
Institute of Internal Auditors (IIA)
Institute of Management Accountants (IMA)
Internet sites are time and date sensitive. It is the purpose of these exercises to have you explore the Internet. You may need to use the Yahoo! search enginehttp://www.yahoo.com(or another favorite search engine) to find a company’s current Web address.
