DeVry University PCAOB Fictitious Revenue & Financial Statements Discussions

1. The Public Company Accounting Oversight Board (PCAOB) is a direct result of the financial statement fraud that occurred in the early 2000s. What does it do, and most importantly, how does it accomplish its mission? What evidence is there that it is effectively executing that mission?

Elaborate on this one:

2.Monday – Kick off Topic 2:Percentage analysis – vertical and horizontal

https://youtu.be/kRpfqzD4sNQ (Links to an external site.)

Class….. Let me get us started:

Percentage analysis – vertical and horizontal

1. Vertical analysis – analyzes the relationships between the items on each of the financial statements by expressing the components as percentages of a specific base item
2. Horizontal analysis – analyzes the percentage change in individual financial statement items from one year to the next
3. Financial ratios – measures the relationship between two different financial statement amounts
4. Current ratio =

1. Quick ratio =
2. Receivable turnover =
3. Collection ratio =
4. Inventory turnover =
5. Average days inventory in stock =
6. Debt to equity =
7. Profit margin =
8. Asset turnover =

1. Deterrence of financial statement fraud incorporates the principles of the fraud triangle.

1. Reduce pressures to commit financial statement fraud
2. Reduce the opportunity to commit financial statement fraud
3. Reduce rationalization of financial statement fraud

QUESTION 1: What is the most effective way to prevent fictitious revenue from being fraudulently ­reported in the financial statements?

I have added my case interactive case studies for you in order to achieve more understanding the financial analysis preparation such as:

• Practice #1 – Horizontal Analysis
• Practice #2 – Vertical Analysis
• Practice #3 – Ratio Analysis – Cabot Corporation
• Practice #4 – Ratio Analysis
• Practice #5 – Ratio Analysis – Sled Company
• Practice #6 – Ratio Analysis – Zip Company

The case study can be opened at: www.doctorkarina.net/Case_Study_2 (Links to an external site.) (Use one of the following browsers: Internet Explorer 9 or later, Safari 5.1 or later, Google Chrome 17 or later).

I look forward to everyone’s active participation this week!

Make sure that you cite your references and use quotations if necessary. Try to paraphrase as much as you can.

3.Great Job! FASB Concepts Statement No. 6 defines revenue as “inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity’s ongoing major or central operations.” Implementing controls to ensure that the criteria inherent in this definition are met prior to recording revenue will assist in mitigating the problem of fictitious revenue

Describe three analytical techniques for financial statement analysis.