1- Management Responsibilities and Internal Controls” Please respond to the following:

• From the e-Activity, analyze management’s role in the fraud and make recommendations as to how management could have prevented the fraud. Support your recommendation with examples.
• Imagine that you are a member of the management team and are having financial difficulties. You need money for a short period of time and plan to pay it back. Develop a scheme that is likely to be undetected by internal controls. Make recommendations that would prevent you from carrying out your scheme. Support your scheme and recommendations with examples.

2-“External Auditors and Governing Bodies” Please respond to the following:

• You are an auditor assigned to XYZ’s Company’s annual audit. The company has not reported an item because management’s assertion is that the item is immaterial. You may agree or disagree. Construct an argument that supports whether you agree or disagree with management’s assertion. Support your answer with examples.
• The Securities and Exchange Commission (SEC) is a key governing body when it comes to financial statements. Evaluate the effectiveness of the SEC over financial statement reporting and take a position as to its effectiveness. Construct an argument that supports your position that the SEC is not effective or is effective in regulating financial reporting. Support your answer with examples.
• 3–Financial Statement Fraud and Bribery” Please respond to the following:
  • Evaluate at least three methods that are used to commit financial statement fraud. Give your opinion of which method is mostly likely to be detected by external auditors. Provide support for your rationale.
  • From the e-Activity, explain the type of transactions the fraudster(s) was involved in, the organization the fraudster worked in, and how the bribery was detected.

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1. Most companies, when computing or estimating costs for a job, will add in an overhead cost, often tying that cost to some direct cost, such as direct labor. What costs are usually included in this overhead cost?

2. In lean manufacturing system designs (aka the Toyota production system), the quality control is integrated into the design of the lean shop. How is quality controlled in the job shop?

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1. Minneapolis Manufacturing Inc.’s CEO has asked you to provide the relevant journal entries using the following acquisition information.

Note: The CEO has not decided whether they will purchase Bloomington Re-Bar Company using the “Asset Acquisition Method” or the “Stock Acquisition Method.”

Required:

A. Prepare the journal entryassuming Minneapolis Manufacturing Inc. decided to purchase Bloomington Re-Bar Company for $13,000,000 in an Asset Acquisition.

B. Prepare the journal entryassuming Minneapolis Manufacturing Inc. decided to purchase 100%of Bloomington Re-Bar Company for $13,000,000 in a Stock Acquisition.

C. Prepare the journal entryassuming Minneapolis Manufacturing Inc. decided to purchase 75%of Bloomington Re-Bar Company for $9,000,000 in a Stock Acquisition.

D. For scenario C.(75% Stock Acquisition – above) prepare a CAD. In addition, prepare the necessaryworkpaper elimination entriesnecessary to complete a consolidated financial statement workpaper.

2. St. Paul Sewer Inc. purchased 70%of Pipestone Pipe Inc. in a Stock Acquisition.The CEO of St. Paul Sewer Inc. mentioned that there is an accounts receivable due from Pipestone Pipe Inc. in the amount of $12,000. How should St. Paul Sewer Inc. account for this inter-company (affiliated company) receivable?Provide the journal entrywith your explanation.

3. The Difference between Implied and Book Value account is:

a) an account necessary for the preparation of consolidated working papers.

b) the excess implied value assigned to goodwill.

c) the unamortized excess that cannot be assigned to any related balance sheet accounts

d) used in allocating the amounts paid for recorded balance sheet accounts that are different than their fair values.

Quiz continues on page 2è

Ethics Scenario:

You have just joined a company as a new staff accountant. Your company is in an acquisition mode (acquiring 5 to 10 smaller companies each of the last 4 years). You are excited to hear that you are going with an acquisition team to facilitate another acquisition (Company X). You have been instructed to sit down with Company X’s controller and explain some pre-acquisition (before the acquisition is finalized) accounting expectations.

Expectations for Company X before the acquisition is finalized.

1. Company X is expected to accelerate the payment of liabilities

2. Company X is expected to delay recording the collections of revenue

3. Company X is expected to increase the estimated amounts in reserve accounts

As you are driving to the Company X headquarters, your gut is telling you something is not right? You pull your car over and call your old classmate who is now an auditor for Ernst and Young. You explain the “expectations” and your old classmate provides the following feedback…

(Old Classmate) There are ways that the three expectations could be managedwithin the rules provided by GAAP, but would be regarded by many as pushing the limitsof GAAP.

Not satisfied with your old classmates answer you call your old accounting professor. Your accounting professor reminds you what he used to say in class,

(Old Professor) “There are gray areas in accounting that many accountants will be influenced to step into. Often, this results in unethical behavior (at a minimum) and in many cases results in illegal acts.” “It’s a dangerous path and I recommend that you stay away from gray.”

1. What effect does each of the three items have on the reported net income of the acquired company before the acquisition and on the reported net income of the combined company in the first year of the acquisition and future years?

2. What effect does each of the three items have on the cash from operations of the acquired company before the acquisition and on the cash from operations of the combined company in the first year of the acquisition and future years?

3. If you are the controller of Company X, how would you respond to these suggestions?

 

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1- Mention in details and equations the different of producing phosphoric acid from phosphate?

 

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1. Midwest Packaging’s ROE last year was only 3 percent, but itsmanagement has developed a new operating plan designed to improve things. Thenew plan calls for a total debt ratio of 60 percent, which will result ininterest charges of $300,000 per year. Management projects an EBIT of$1,000,000 on sales of $10,000,000, and it expects to havea total assetsturnover ratio of 2.0. Under these conditions, the tax rate will be 34 percent.If the changes are made, what return on equity will the company earn?

 

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