ACG-2021 Lecture Notes - Lecture 1: Healthsouth, Net Income, Financial Statement

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21 Jan 2017
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ACG Module 1 Notes
- Forms of Business Organization
o Corporation- an incorporated business entity that has filed articles of
incorporation in a state of domicile
Can attract large amounts of capital investment
Allows for an easy transfer of ownership
Can attract professional management
Provides stockholders with limited liability
Survives the death of its owner
Corporations are subject to more government regulations
Shareholders can have difficulty knowing whether management is making
decisions in shaeholdes’ est iteest
Corporations are subject to income taxation
- Definition of Accounting
o Accounting- the information system that identifies, records, and communicates
the economic events of an organization to interested users
Users can be divided into 2 groups
Internal
External
o Purpose is to provide economic information as inputs for decision making by
users of the information
- Ethics in Financial Reporting
o Recent financial scandals include: Enron, WorldCom, HealthSouth, AIG, and
others
o Congress passed Sarbanes-Oxley Act of 2002
o Effective financial reporting depends on sound ethical behavior
o Sarbanes-Oxley Act resulted in
Top management must now certify the accuracy of financial information
Penalties for fraudulent activity was increased
Independence of auditors was increased
Increased oversight by the board of directors must occur, including the
oad’s seletio ad supevisio of the idepedet audito
o Solving an Ethical Dilemma
1. Recognize an ethical situation and the ethical issues involved
2. Identify and analyze the principal elements in the situation
3. Identify the alternatives, and weight the impact of each alternative on
various stakeholders
- Business Activities
o All businesses are involved in
Financing
Investing
Operating
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