1. Securities and Exchange Commission Many people have argued


Question Description:

35

I have some accounting 3 questions homework and I attached 3 questions below. Thanks Discussion.docx 1. Securities and Exchange Commission Many people have argued that the purpose of the SEC is to protect investors. Some believes that the best way to do this by preventing weak companies from issuing stock. Others say that the SEC should require full disclosure and then let the buyer beware. Which do you think is more appropriate: a preventive role or disclosure role? 2. GAAP is a Point, Not an Oval You are the chief financial officer (CFO) of Lorien Company, which is publicly traded. At the annual shareholders’ meeting, you have been asked to discuss the company’s recent reported results. As part of your presentation, you illustrated the minimum and maximum values for net income that could have been reported by Lorien under a range of accounting assumptions used by other companies in your industry. Your statement prompted a cry of outrage from one of the shareholders present at the meeting. This shareholder accused you of being an unprincipled liar and stated that any suggestion that there is range of possible net income values for given company in a given year indicates an overly liberal approach to financial reporting. This shareholder has moved that your employment contract be immediately terminated because of an apparent lack of moral character. The shareholder’s arguments have been persuasive to a large number of people present at the meeting. What can you say to defend yourself? 3. Which is more important having a good system of internal controls or hiring honest employees? Is an internal control structure necessary? Your uncle doesn’t seem to think so. He works for regional employment staffing service and recently commented, “As long as a company hires hardworking, honest people, fraud and abusive financial reporting cases will be almost nonexistent. People with integrity will always make the right choice. In the last months, we haven’t placed anyone for employment who has been fired or let go for fraudulent activity!” A friend argues, however, that anyone presented with the right pressures can commit fraud and the opportunities must be eliminated through an effective internal control structure. Who do you agree with?

Answer

35