6 C H A P T E R Ensuring the Integrity of Financial Information.

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Presentation transcript:

6 C H A P T E R Ensuring the Integrity of Financial Information

Learning Objective 1 Identify the types of problems that can appear in financial statements.

What Are Three Reasons for Problems in the Financial Statements?

Types of Errors in the Reporting Process Transactions and journal entries. Aug 1 Supplies . . . . . . . . . . . . . . . 100 Cash . . . . . . . . . . . . . . . . 100 Postage stamps. What types of errors are possible? . 2

Types of Errors in the Reporting Process Accounts and ledgers. What types of errors are possible? 2

Describe Some Ways to Do Fraudulent Financial Reporting.

Learning Objective 2 Describe the safeguards employed within a firm to ensure that financial statements are free from problems.

Define Internal Control Structure 7

What Are Some Concerns When Designing Internal Control Structures?

Policies and Procedures Internal Control Structure 1. The control environment. 2. The accounting system. 3. The control procedures.

What Are the Three Parts of the Control Structure?

What Are the Guidelines on Reporting on Internal Controls? 19

Learning Objective 3 Understand the concept of earnings management and why it occurs.

List and Discuss Four Reasons to Manage Earnings $ $

Review the Earnings Management Continuum

Describe and Explain the GAAP Oval Which one is ethical? D E A B C Lowest GAAP Earnings Highest GAAP Earnings

Learning Objective 4 Understand the major parts of the Sarbanes-Oxley Act and how it impacts financial reporting.

Who are Sarbanes and Oxley?

What are the major parts of the act?

What are the major parts of the act?

What are the major parts of the act?

Learning Objective 5 Describe the role of auditors and how their presence affects the integrity of financial statements.

Discuss Internal Auditors Role Who are internal auditors? What do they do?

What is the Role of External Auditors? Who are external auditors? What do they do?

What Do Auditors Do?

What Do Auditors Do?

Are Auditors Independent? MANAGEMENT

Learning Objective 6 Explain the role of the Securities and Exchange Commission in adding credibility to financial statements.

Securities and Exchange Commission (SEC) Securities Act of 1933 Requires companies issuing new debt to submit a registration statement to the SEC for approval. Securities Act of 1934 Requires public companies to file detailed periodic reports with the SEC, as well as to submit audited financial statements which contain a CPA opinion.

What Are the SEC-Required Reports?

"Success is on far side of failure." T.J. Watson Founder, IBM End Chapter 5