Concept explainers
(a)
Introduction:
Integrity, Objectivity and
In a business, every financial report is important for investors, creditors and analysts to evaluate the financial performance of the business. It is important that such financial statements should be transparent, reliable, consistent and comparable so that there is no misleading of any financial information. If there is any failure in achieving the objective of accounting data, it will hamper the accountant's integrity in presenting financial statements.
The type of information about the business of company B would person A provide to bank C.
(b)
Introduction:
Integrity, Objectivity and ethics in a business:
In a business, every financial report is important for investors, creditors and analysts to evaluate the financial performance of the business. It is important that such financial statements should be transparent, reliable, consistent and comparable so that there is no misleading of any financial information. If there is any failure in achieving the objective of accounting data, it will hamper the accountant's integrity in presenting financial statements.
The type of information about a business that the bankers would want before extending the loan.
(c)
Introduction:
Integrity, Objectivity and ethics in a business:
In a business, every financial report is important for investors, creditors and analysts to evaluate the financial performance of the business. It is important that such financial statements should be transparent, reliable, consistent and comparable so that there is no misleading of any financial information. If there is any failure in achieving the objective of accounting data, it will hamper the accountant's integrity in presenting financial statements.
The mutual interest between bankers and business owners.
Want to see the full answer?
Check out a sample textbook solutionChapter 1 Solutions
Survey of Accounting - With CengageNOW 1Term
- The accounting firm involved in this case wants to know if their independence will be questioned by the BOA. You have been asked to submit an analysis and conclusion. 2. Franklin Rosario is an audit manager in the Salvador & Santos accounting firm. He has just been assigned to the audit of the Starex Money Market Fund. Franklin has maintained a money market account with SMMF since it opened in 2008. All his savings, amounting to 75 percent of his total assets, are in this account, which pays the highest interest available in money market funds. However, his account constitutes only .00001 percent of the fund's assets.arrow_forwardGinnian and Fitch, a regional accounting firm, performs yearly audits on a number of different for-profit and not-for-profit entities. Two years ago, Luisa Mellina, Ginnians partner in charge of operations, became concerned about the amount of audit time required by not-for-profit entities. As a result, she instituted a series of training programs focusing on the auditing of not-forprofit entities. Now, she would like to see if the training seemed to work. So, she ran a multiple regression on 22 months of data for Ginnian for three variables: the total monthly cost of audit professional time, the number of not-for-profit audits, and the hours of training in the audit of not-for-profit entities. The following printout was obtained: Required: 1. Write out the cost equation for Ginnians audit professional time. 2. If Ginnian expects to have 9 audits of not-for-profits next month and expects that audit professionals will have a total of 130 hours of not-for-profit training, what is the anticipated cost of professional time? 3. Are the hours spent auditing not-for-profit entities positively or negatively correlated with audit professional costs? Is percentage of experienced team members positively or negatively correlated with audit professional cost? 4. What does R2 mean in this equation? Overall, what is your evaluation of the cost equation that was developed for the cost of audit professionals?arrow_forwardYour client is preparing financial statements to show the bank. You know that he has incurred a refrigeration repair expense during the month, but you see no such expense on the books. When you question the client, he tells you that he has not yet paid the 1,255 bill. Your client is on the accrual basis of accounting. He does not want the refrigeration repair expense on the books as of the end of the month because he wants his profits to look good for the bank. Is your client behaving ethically by suggesting that the refrigeration repair expense not be booked until the 1,255 is paid? Are you behaving ethically if you agree to the clients request? What principle is involved here?arrow_forward
- Your small business client, Phillip’s Computer Repair Shop, is experiencing financial difficulties and has to lay off one of its four employees in the accounting area. Phillip has asked you to determine what duties should be assigned to the three remaining employees—Abigail, Bryan, and Chris—to maintain the best separation of duties.Required:Assign the following 10 duties to each of the three employees.a. Reconcile bank statement.b. Open mail and list checks.c. Prepare checks for Phillip’s signature.d. Prepare payroll checks.e. Maintain personnel records.f. Prepare deposit and take to bank.g. Maintain petty cash.h. Maintain accounts receivable records.i. Maintain general ledger.j. Reconcile accounts receivable records to general ledger account.arrow_forwardGail is a director in a regional bank. As part of her director’s duties, she has to review financial statements and other reports from the Chief Financial Officer prior to the bank’s board meetings. Gail has a degree in economics and has worked in banking for many years, however, since becoming a director she believes accounting knowledge would assist her carry out her duties. Gail incurred various costs in undertaking a Bachelor of Commerce in professional accountancy with the University of Southern Queensland. During the year ending 30 June 2021 Gail incurred the following costs related to the course: HELP fees $2,600 Stationery $180 Textbooks $220 Expenses of travelling between her job and USQ where the course was being held $120 Required: Discuss whether any amounts of expenditure incurred by Gail would be allowable as a deduction during the year ended 30 June 2021 under any section of the Income Tax Assessment Acts. Support your discussion with reference to legislation,…arrow_forwardHelen Hernandez, president of Double H Enterprises, applied for a $175,000 loan from Great Nations Bank. The bank requested financial statements as a basis for granting the loan. Helen instructed her accountant to provide the bank with a balance sheet, but to omit the other financial statements because her business incurred a net loss last year. Helen contends that as the owner of the business, it is her right to withhold certain financial statements from the bank. Do you agree with Helen? Why or why not? What type of information would banks require from a loan applicant and why would the loan officer request this information?arrow_forward
- You have recently been hired by Davis & Company, a small public accounting firm. One of the firm’s partners,Alice Davis, has asked you to deal with a disgruntled client, Mr. Sean Pitt, owner of the city’s largest hardwarestore. Mr. Pitt is applying to a local bank for a substantial loan to remodel his store. The bank requires accrualbased financial statements but Mr. Pitt has always kept the company’s records on a cash basis. He does not seethe purpose of accrual based statements. His most recent outburst went something like this: “After all, I collectcash from customers, pay my bills in cash, and I am going to pay the bank loan with cash. And, I already show mybuilding and equipment as assets and depreciate them. I just don’t understand the problem.”Required:1. Explain the difference between a cash basis and an accrual basis measure of performance.2. Why, in most cases, does accrual basis net income provide a better measure of performance than net operatingcash flow?3. Explain the…arrow_forwardYou have recently been hired by Davis & Company, a small public accounting firm. One of the firm’s partners,Alice Davis, has asked you to deal with a disgruntled client, Mr. Sean Pitt, owner of the city’s largest hardwarestore. Mr. Pitt is applying to a local bank for a substantial loan to remodel his store. The bank requires accrualbased financial statements but Mr. Pitt has always kept the company’s records on a cash basis. He doesn’t see thepurpose of accrual based statements. His most recent outburst went something like this: “After all, I collect cashfrom customers, pay my bills in cash, and I am going to pay the bank loan with cash. And, I already show mybuilding and equipment as assets and depreciate them. I just don’t understand the problem.”Required:1. Explain the difference between a cash basis and an accrual basis measure of performance.2. Why, in most cases, does accrual basis net income provide a better measure of performance than net operating cash flow?3. Explain the…arrow_forwardColleen Fernandez, president of Rhino Enterprises, applied for a $175,000 loan from First Federal Bank. The bank requested financial statements from Rhino Enterprises as a basis for granting the loan. Colleen has told her accountant to provide the bank with a balance sheet. Colleen has decided to omit the other financial statements because there was a net loss during the past year. In groups of three or four, discuss the following questions: 2. a. What types of information about their businesses would owners be willing to provide bankers? What types of information would owners not be willing to provide? b. What types of information about a business would bankers want before extending a loan? c. What common interests are shared by bankers and business owners?arrow_forward
- Magi Chen is the managing director of Sun Construction Pty Ltd, a family owned business that provides construction services. As Magi is interested in purchasing some new construction equipment’s for her business, she has approached her local bank for finance. The bank has asked that Magi provide an audited financial statement to assist them in considering her loan application. Magi has approached your audit firm for this service and you have been allocated the task of auditing Sun Construction for the year ended 30 June 2019. You have undertaken a preliminary review of the business and determined that a substantive testing approach would be suitable and appropriate. You are currently preparing an audit program for the revenue cycle. The following information has been obtained from your review:• Magi usually works 120 hours a fortnight. Part of this time is spent travelling between different clients and is not charged to the clients. The remaining time is charged at $60 per hour,…arrow_forwardJohn Drake, a partner at Drake and Buetz, is meeting with a potential new client. The client recently saw the firm's TV advertisement claiming that the firm was "the premier accounting firm in western Canada." The client requires a review engagement report with its financial statements to obtain a bank loan. John advises that his fee will be 10 percent of any bank loan granted. What principles and/or rules of professional conduct apply to this scenario? There is a violation with regards to advertising. Professional competence is lacking because of the advertising of the firm as the "premier" accounting firm. There is no violation of any ethical principles or rules of professional conduct. There is a violation of the code of professional conduct regarding fees and pricing. OA bank always requires an audit, a review engagement is not permitted. Fees are to be based on an estimate of work performed, not on percentage of a bank loan.arrow_forwardSuppose you are a part of a group of students from a prominent university and were sent out as a team to work with a leading merchandizing company as a part of a work experience program. The team having been introduced to the general manger was told that the Accountant who normally prepares the financial statements has suddenly resigned and there is no one available to prepare the company’s financial statements which are now due. As aspiring university students, you and your group members have expressed an interest in taking on the task. As a group, you are required to collaborate and analyse the problem at hand then apply the accrual basis of accounting in the preparation of the company’s financial statements. The following additional information is available at December 31, 2018: Insurance of $450,000 was paid on May 1, 2018 for the 10-months to February 2019. The furniture and fixtures have an estimated useful life of 10 years…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage LearningCollege Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College Pub