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Published byVernon Ward Modified over 6 years ago
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The Baptist Foundation of Arizona: The Conservatism Constraint
Case 1.10 The Baptist Foundation of Arizona: The Conservatism Constraint Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
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BFA Case Relevant Technical Knowledge
The Conservatism Constraint Accountants must take care to not overstate assets or revenues and to not understate liabilities and expenses. As such, when faced with a choice between two different solutions, accountants should choose the path that is less likely to overstate assets or revenues and/or understate liabilities and expenses.
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BFA Case Relevant Technical Knowledge
PCAOB AS No. 5 – Paragraph 14 When auditors evaluate the system of internal control, they need to evaluate whether the identified controls adequately address the risks of material misstatement due to fraud. Indeed, because of their sensitive nature, the standard explicitly mentions controls related to “significant, unusual transactions, particularly those that result in late or unusual journal entries.”
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BFA Case Relevant Technical Knowledge
PCAOB AS No Paragraphs 13 & 15 in “the audit of financial statements, the auditor should perform substantive procedures, including tests of details that are specifically responsive to the assessed fraud risks.” “the auditor should perform audit procedures to specifically address the risk of management override of controls” which include “examining journal entries and other adjustments for evidence of possible material misstatement” and “evaluating the business rationale for significant unusual transactions”
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Psychology Literature - How to Best Acquire Knowledge
Feature Repeated Case Experiences with Feedback; and Teach Technical Concepts within Real-Life Contexts Consider the following additional cases: The Baptist Foundation of Arizona: Related Party Transactions Enron: The Revenue Recognition Principle Qwest: The Full Disclosure Principle
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Epilogue - BFA BFA filed for Chapter 11 bankruptcy protection
BFA filed suit against Arthur Andersen for negligence, causing the accounting firm’s bankruptcy
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Epilogue - BFA Arthur Anderson paid $217 million to settle investor lawsuits Former president William Pierre Crotts and chief legal counsel Thomas Grabinski convicted of three counts of fraud
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