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Essay / Research Paper Abstract
A 7 page paper evaluating in general terms a public computer company's intended financial statements and its auditors' concerns with the company's intentions. The paper discusses Hierarchy of Accounting Qualities; the process of setting standards; and argues that there should be different standards for different types of businesses. Bibliography lists 4 sources.
Page Count:
7 pages (~225 words per page)
File: CC6_KSacctRevRec.rtf
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Unformatted sample text from the term paper:
Subject: Financial Reporting Date: Caltron Computers has included four transactions in its financial reports that the companys auditors find questionable. There is
nothing wrong with underlying business practices and the company certainly is not making any overt effort to mislead investors, but some of its reporting decisions are not in its best
interests. Even though reporting as the company wants to present it places the company in a more favorable light in terms of the bottom line for the current reporting
period, there are other means available to the company. Other methods of recognizing revenue are more meaningful, both in terms of reporting integrity and internal uses of current financial
reports. 1. Hierarchy of Accounting Qualities As the case states, there are four transactions that fall neither onto the black nor the
white side of the gray fence, but rather seem to want to straddle and ride it. On the one hand, reporting the highest revenues possible during any reporting period
is desirable; on the other, reporting as Caltron wants to pursue is misleading and could create problems in the future. The auditors concern for the future lies with a
secondary public stock offering in early February following the current reporting period. Managements concerns should lie with decision making in the short term future and being presented with the
need to explain an apparent decline in business from one reporting period to the next, when in fact no decline occurred but "the numbers" had been skewed in the earlier
period to create the illusion of a decline in business. Though this apparent decline may not occur, historical fact indicates that at least one of the large transactions that
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