MATH 223 Lecture Notes - Lecture 9: Public Company Accounting Oversight Board, International Accounting Standards Board, International Financial Reporting Standards

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Accounting Organizations:
Institute of Internal Auditors: (b) International organization dedicated to the
advancement of internal auditing.
Securities and Exchange Commission: (a) Government agency responsible for
financial reporting by publicly held companies.
American Institute of CPAs: (g) Professional association of Certified Public
Institute of Management Accountants: (c) Organization dedicated to providing
members personal and professional development opportunities in the area of
management accounting.
Financial Accounting Standards Board: (h) Private sector organization that
establishes accounting standards.
American Accounting Association: (e) Organization consisting primarily of
accounting educators that encourages improvements in teaching and research.
Public Company Accounting Oversight Board: (d) The body charged with setting
auditing standards for audits of public companies.
International Accounting Standards Board: (f) The group that creates and
promotes International Financial Reporting Standards (IFRSs)
The major focus of accounting information is to facilitate decision making.
As an investor in a company, your primary objective would be the return of your
investment in the future, as well as a return for the use of your funds by the
company during the period of investment. You would need information that
allowed you to assess the probability of those events occurring in the future.
As a manager of a company, your primary objective would be to have information
that allows you to better manage the company to make the best decisions
possible to enhance the value of the company.
While there is some information that would be equally important for investors and
managers, much of the information needed by the two groups is different.
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Internal accounting information is used primarily for internal decision making by an
enterprise’s management.
Three primary purposes of internal accounting information?
o To assist investment and credit decisions.
o To assess the amount, timing and uncertainty of future cash flows.
o To report about the enterprise’s resources, claims to those resources, and
how both the resources and claims to them change with time.
Which of these is the most general and which of these is the most specific?
o The first objective is the most general by meeting information needs of
investors and creditors, general information that is useful to many other
financial statement users is provided.
o The third objective is most specific an organization’s resources are
referred to as assets” and claims to those resources are from creditors
and owners.
Give several examples of the kinds of decisions that internal accounting
information supports.
o What to produce?
o How much to produce?
o What is the most profitable line of business?
o In which projects to invest?
The following professional organizations would be of greatest value to me if my position
involved each of the following independent roles:
Accounting Educator: American Accounting Association.
Management Accountant: Institute of Management Accountants
Certified Public Accountant: American Institute of CPA's
Audits of financial statements are an important part of the accounting process to ensure
integrity in financial reporting.
The purpose of an audit is “to investigate a company’s financial statements in
order to determine the fairness of these statements.
An audit that concludes that the financial statements are presented in conformity
with Generally Accepted Accounting Principles implies that the financial
statements are accurate and reliable which would mean, that as an external user,
I can make decisions based on these statements.
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