to prevent fraudulent financial reporting from occurring, as well as
the major obligation of the CEO and CFO to ensure compliance.
Examine the negative results on stakeholders and the financial
statements of an IRS audit which generates additional tax and
penalties or subsequent audits. Assume that the subsequent audit and /
or additional tax and penalties result from the taxpayer’s use of an
inventory reserve account, applying a 10 percent reduction to
inventory over three (3) years.
Discuss the applicable federal tax laws, regulations, rulings, and court
cases related to the inventory write-downs, and explain the specific
relevance of each to the write-down.
Research the current generally accepted accounting principles
(GAAP) regarding stock option accounting. Evaluate the current
treatment of the company’s share-based compensation plan based on
GAAP reporting. Contrast the financial benefits and risks of the
share-based compensation stock option plan with the financial benefits
and risks of a share-based stock-appreciation rights plan (SARS).
Recommend to the CFO which plan the company should use, and
provide the correct accounting treatment for each.
Research the reporting requirements for lease reporting under GAAP
and International Financial Reporting Standards (IFRS). Based on
your research, create a proposal for future lease transactions to the
CFO. Within the proposal, discuss the use of off-the-balance sheet
financing arrangements, capital leases, and operating leases, and
indicate the related business and financial risks of each.
Create an argument for or against a single set of international
accounting standards related to lease accounting based on the global
market and cross border leases of assets. Examine the benefits and
risks of your chosen position.
Examine the major implications of SAS 99 based on the factors you
discovered during the initial evaluation of the company. Provide
support for your rationale.
Analyze the potential for a material misstatement in the financial
statements based on the issues identified in your initial evaluation.
Make a recommendation to the CFO for the issuance of
restated