1. Learning Objectives Understand the Business – LO1 Explain the needs of financial statement users. – LO2 Describe the environment for financial reporting, including the recent changes to corporate governance. Study the accounting methods – LO3 Prepare a comparative balance sheet, multiple-step income statement, and statement of shareholders’ equity. – LO4 Describe other significant aspects of the financial reporting process, including external audits and the distribution of financial information. – LO5 Explain the reasons for, and financial statement presentation effects of, using IFRS. Evaluate the results – LO6 Compare results to common benchmarks. – LO7 Calculate and interpret the debt-to-assets, asset turnover, and net profit margin ratios. Review the chapter 1© McGraw-Hill Ryerson. All rights reserved.

2. The Financial Reporting Environment Key organizations are: – Canadian Accounting Standards Board (AcSB) Responsible for GAAP in Canada and the CICA Handbook – International Accounting Standards Board (IASB) Responsible for IFRS – Provincial and territorial securities commissions Observe and monitor the capital marketplace © McGraw-Hill Ryerson. All rights reserved.2 LO2

3. Accounting Fraud Three things must exist for accounting fraud to occur: © McGraw-Hill Ryerson. All rights reserved.3 The Fraud Triangle Incentive OpportunityPersonality LO2

4. © McGraw-Hill Ryerson. All rights reserved.4 Counteract Incentives - Stiffer fines and prison terms Reduce Opportunities -Internal control report from management - Stronger oversight by directors - Internal control audit by external auditors Encourage Honesty -Anonymous tip lines - Whistle-blower protection - Code of ethics LO2 Significant changes have been made to the Canadian financial reporting environment to reduce fraud. The Fraud Triangle