Accounting

Accurate financial statements are very important for outside business interests. The users of financial statements, such as customers, suppliers, creditors, need accurate financial statements for better decision making activities.   In addition to this, tax collection agencies, community residents and stock market agents need accurate financial statements for deciding on their next move.

There are many users of financial statements, namely, customers, suppliers, creditors, tax collection agencies etc. Certain companies, like Enron and WorldCom, issue fraudulent financial statements. Auditing brings credence in terms of the fairness of financial statements. Accurate financial statements are important for outside business interests (Pride, 2008).

Customers
Customers need accurate financial statements to determine if the company will continue supplying goods or services satisfying their needs.  The clients require a financial statement showing net profits of a company. It is a sign that the company will continue to serve their business or personal needs for another year. A financial statement showing net losses will indicates a negative aspect, serving a sign that the company may not be able to continue meeting their business or personal needs for another year.  The customers do not need to worry if the company generates considerable profits.
     
On the other hand, the customers may start to look for other alternative suppliers, if the financial statements indicate a net loss. A false financial statement indicating net profits, instead of the actual net losses, would bring a wrong message to the customers. In this case, the clients will after all be surprised to find that the company will close down due to bankruptcy. The clients will then have less time to search for other suppliers of customer needs.  This falls under the concern concept of the United States Generally Accepted Accounting Principles (Bragg, 2001).

Suppliers 
Suppliers need accurate financial statements to determine, if the company continues to buy their products. A financial statement showing net profits will satisfy the companys suppliers, as this is a sign that the company will continue to buy their products for another year. A financial statement showing net losses will be perceived negatively by the suppliers, as this is a sign that the company may not be able to continue satisfying their business or personal needs with the suppliers goods or services for another year.
     
Furthermore, the suppliers do not need to worry, if the company generates profits. On the other hand, the suppliers may start to look for other alternative companies to serve, if the financial statements indicate a net loss. A false financial statement indicating net profits, instead of the actual net losses, would bring a wrong signal to the suppliers. In this case, the suppliers will be surprised to find that the company will shut down within one year. The suppliers will then have less time to search for other companies to serve (Rittenberg, 2009).

Creditors
Creditors need accurate financial statements to determine, if the company continues to avail of credit services. A financial statement showing net profits will give the general credit picture of the company. It is a sign that the company will be able to pay for their maturing obligations on time for another year. A financial statement showing net losses will not be good in the eyes of the creditors. It is a signal that the company may not be able to continue pay their maturing loans and other payables for another year.
   
Furthermore, the creditors do not need to be concerned, if the company generates profits. On the other hand, the creditors may start to look for other alternative companies to serve, if the financial statements indicate a net loss. A false financial statement indicating net profits, instead of the actual net loss, would bring a wrong signal to the customers. In this case, the creditors will be surprised to discover that the company will close down due to bankruptcy. In the same light, the creditors will have less time to search for other companies to offer credit terms (Rittenberg, 2009).

Tax collection agencies
Tax collection agencies need accurate financial statements to determine if the company can pay their taxes. A financial statement showing net profits will indicate the companies will be able to pay higher taxes. It is a sign that the company will continue to pay taxes for another year. A financial statement showing net losses will be perceived negatively by the tax agencies. It is a signal that the company may not be able to continue paying similar tax amounts for another year.
     
Further, the tax agencies do not need to worry, if the company generates profits. On the other hand, the tax agencies may start to scrutinize the financial statements to determine if the company falsified the financial reports in a net loss situation. Some companies reduce net income or present net loss. A false financial statement indicating net loss, instead of the actual net income, would bring a wrong signal to the tax agencies. In this case, the tax agencies must scrutinize the financial statements for fraud (Covello, 2006).

Community residents
Community residents need accurate financial statements to determine, whether the company will hire local residents. A financial statement showing net profits will be perceived positively by the residents. It is a sign that the company will continue to hire new staff for another year. A financial statement showing net loss will diminish their chances for employment in the company. It is a signal that the company may not be able to continue hiring community residents for another year. The community residents do not need to worry if the company generates profits.
     
On the other hand, the community residents may start to look for other companies to work for, if the financial statements indicate a net loss. A false financial statement indicating net profits, instead of the actual net losses, would bring a wrong signal to the community residents. In this case, the community residents will be surprised to find out that the company will stop hiring the community residents within one year. The community residents will have lesser time to find another job in the community (Cunnighham, 2002).

Stock market agents
Stock market agents need accurate financial statements to determine, if the company is a good investment alternative. A financial statement showing net profits will make stock market agents proud to sell the company to prospective investors. It is a sign that the company will continue to be a viable investment opportunity for another year. A financial statement showing net losses will not bring a good picture in the eyes of the stock market agents. It is a signal that the prospective investors will shy away from the company as an investment option for another year.
     
Furthermore, the stock market agents do not need to worry, if the company generates profits. On the other hand, the stock market agents may start to look for other alternative companies to sell in the stock market, if the financial statements will indicate a net loss. A false financial statement showing a net profit, instead of the actual net loss, would give a wrong signal to the stock market agents. In this case, the stock market agents will be surprised to discover that the company will stop operations within one year. The stock market agents will then have lesser time to find other companies to sell (Cunnighham, 2002).

Environmental groups 
Environmental groups need accurate financial statements to determine, if the company implements environmental laws. A financial statement showing amounts spent to install environmentfriendly assets will make the environmental groups happy. It is a sign that the company will continue to implement environmental procedures within its premises for another year. A financial statement showing the absence of environment friendly assets like anti  smoke pollution (high smoke exhaust stack) features will not be good in the eyes of the suppliers. It is a signal that the company may not be able to continue complying with anti pollution statutes for another year.
     
In addition, the environmental groups do not need to worry if the company invests in anti pollution devices. On the other hand, the environmental groups may investigate why the company does not include anti pollution devices among its expenses or assets enumerated in the financial statements. A false financial statement indicating the company invested in anti pollution devices, instead of the actual position where nothing was funneled into anti pollution spending, would bring a wrong signal to the environmental agencies. In this case, the environmental group may be surprised to find that the company closed shut down within one year because another environmental agency group will penalize the company for violating anti pollution and other environmental policies (Bragg, 2001).

Current investors
Current investors need accurate financial statements to determine if the company will continue distributing dividends. A financial statement showing net profits will make current investors happy. It is a sign that the company will continue to give dividends for another year. A financial statement showing net loss will not be good in the eyes of the current investors. It is a signal that the company may not be able to continue offering dividends for another year.
       
Further, the current investors do not need to worry if the company generates profits. On the other hand, the current investors may start to look for other alternative companies to invest their cash and other assets if the financial statements will indicate a net loss. A false financial statement indicating net profit, instead of the actual net loss, would bring a wrong signal to the current investors. In this case, the current investors will be surprised to find the company closed shut down within one year. The current investors will then have lesser time to search for other companies to invest their money and other assets (Larson, 2003).

Prospective investors
Prospective investors need accurate financial statements to determine if the company will be a good investment. Financial statements showing net profits will bring more investors into the company. This will make prospective investors happy. It is a sign that the company will continue to give dividends for another year. A financial statement showing net loss will not be good in the eyes of the current investors. This is clear landmark indicating the company will not be able to offer dividends for another year. The prospective investors do not need to worry if the company generates profits. On the other hand, the same prospective investors may search for other alternative companies to invest their cash and other assets if the financial statements will indicate a net loss.
   
In addition, a false financial statement indicating net profit, instead of the actual net loss, would bring a wrong signal to the prospective investors. In this situation, the prospective investors will be surprised to find the company will not release dividend payments to prospective investors within one year. The prospective investors will then have lesser time to search for other companies to put their hard-earned money and other assets (Larson, 2003).
     
City Planners
City planners need accurate financial statements to determine the ways of improving the local economy. Financial statements showing net profits will persuade the local planners to construct bigger roads, and other infrastructure to increase the current movement of goods and services between the clients and the companys premises. Road widening will make both the clients and the manufacturing companies happy. A financial statement showing net loss will tempt the city planners to forego road expansion.
     
Further, a net loss may indicated to the city planners that it would be useless to widen the roads from the company to the clients because there is a strong probability that the company may close shop within one year from the income statement date. A false financial statement indicating net profits, instead of the actual net losses, would bring a wrong signal to the city planners. In this situation, the city planners will be surprised to find the company shutting operations within one year. The city planners will then feel that the road expansion was a waste of tax payers money (Pride, 2008).

Conclusion      
All things considered, accurate financial statements are crucial for outside business interests. First, customers need accurate financial statements to determine if the company will continue to fill the clients needs. Second, suppliers need accurate financial statements to determine if the company will continue to purchase from the suppliers. Third, creditors need accurate financial statements to determine if the company will continue using credit. Fourth, tax collection agencies need accurate financial statements to determine if the company will continue paying taxes. Fifth, community residents need accurate financial statements to determine if the company will employ local residents.  Sixth, stock market agents need accurate financial statements to determine if the company is a good investment choice. Seventh, environmental groups need accurate financial statements to determine if the company obeys environmental laws. Eight, current investors need accurate financial statements to determine if the company will continue dividend payout. Ninth, prospective investors need accurate financial statements to determine if the company will be a good investment venue. Tenth, city planners need accurate financial statements to determine ways of advancing the local economy. Indeed, accurate financial statements are essential for outside business interests.

As per the lease agreement with Goliath Co. signed on December 15, 2004, the Big Bear Company in compliance with the definition of rental provided in section 13 of the Financial Accounting Standards Board (FSAB) hereby recognized that this type of lease fall under the category of minimum lease payments. Less payment under this category depend on existing factors on which payments are made and are measurable at the time of inception (Statement of Financial Accounting Standards No. 29, p. 4).

Given the information above, the provisions that are factors to this agreement have been carefully analyzed and found out that of the three provisions it appears that only two should be included in the minimum lease payments. These are provision 2 and provision 3 in view of the FASB ruling that minimum lease payment should only include actual monthly rentals plus the executory costs excluding repair expense, insurance fees, and the required tax expense.

Facts
December 15, 2004, Big Bear signed a lease agreement with Goliath Co for a ten year non- On cancelable term to lease a combustion turbine for one million dollars payable ratably over 12 months. Under provisions 1, Big Bear paid five hundred thousand dollars to its legal council that handled the negotiation and agreed to pay the legal fees incurred by the Goliath Co in the amount of one million dollars aside from the annual lease payments in the amount of million dollars payable over twelve moths as stated in provisions three. Big Bear also recognized that in the event that Big Bears bank declares default under its primary credit arrangement, Big Bear will be required  to pay penalty particularly if there a material adverse change in its financial condition.  

Research (Discussions)
Ryan (2007) defined minimum lease payments as the payments the lessee is required to make over the lease term in connection with the leased property (Ryan, p. 359). Minimum payment according to him include guarantees by the lessee of the residual value of the leased asset and penalties the lessee is required to make at the end of the lease term if the lease payments is not renewed (p. 359). Ryan emphasized that minimum payment do not include contingent rentals, guaranteed by the lessee of the lessors debt, or executory costs such as those mentioned earlier.  The FASBs FAS 13 status also confirms that the lessee can only be required to pay    

Ryan, S. (2007) Financial Instruments and Institution Accounting and Disclosure USA John Wiley and Sons
httpwww.xavierpaper.comdocumentsusgaapn.Fas29.pdf On December 15, 2004, Big Bear signed an agreement with Goliath Co for a ten year non-cancelable term to lease a combustion turbine for one million dollars payable ratably over 12 months. Under provision 1, Big Bear paid five hundred thousand dollars to its legal council who negotiated the deal and agreed to pay the legal fees incurred by Goliath Co amounting to one million dollars, aside from the annual lease payments in the same amount stated in provision three. Big Bear also recognized that in the event that Big Bears bank declares default under its primary credit arrangement, Big Bear will be required  to pay penalty particularly if there is a material adverse change in its financial condition.    

Research (Discussions) -
Ryan (2007) defined minimum lease payments as the payments the lessee is required to make over the lease term in connection with the leased property (p. 359). Minimum payment according to him include guarantees by the lessee of the residual value of the leased asset and penalties the lessee is required to make at the end of the lease term if the lease payments is not renewed (p. 359). Ryan emphasized that minimum payment does not include contingent rentals, guaranteed by the lessee of the lessors debt, or executory costs such as those mentioned earlier.  The FASBs FAS 13 status also confirms that the lessee can only be required to pay in connection with leased property.    

Provision 1 revealed that Big Bear made other payment aside from the usual rental payment which clearly do not include in the minimum lease payment. This makes it clear that the costs as well as the potential cost associated to the provision could not be included in the minimum lease payment as defined by Ryan and as stated in the FASBs FAS 13 because these payments are not required in connection with the lease term. The payments mentioned in provisions 2 and 3 however, can be included in the minimum lease payments because they were obviously required in the lease agreement.

Provision 2 for instance stated that in case of a default provision in the lease, Big Bear will be required to pay penalty payment. According to FASB Emerging Issues Task Force, penalty payment is part of the bargain renewal options to which failure on the part of the lessee to abide in the lease terms at the inception of a lease will incur penalty on the part of the lessee (FASB Emerging Issues Task Force, p. 2). Provision 2 therefore should be included in the minimum lease payment in view of the fact that penalty payments are part of the lease terms agreement and is therefore required in making the lease terms.

Provision 3 on the other hand, talks about the required rental or lease payment in the amount of one million dollars payable ratably over twelve months for the next ten years. The payments mentioned in this provision including the interest rate are required in making the lease terms. But the main ground for the inclusion of these two provisions in the minimum lease payment is the fact the factor by which the lease payment depends exists and is measurable at the time of inception of the lease. Apparently, factors to which lease payment depend do not exist in provision one and therefore should not be included in the minimum lease payment.

Conclusion
Given the circumstance behind lease payments, it is important that a lessee settle on the lease term at the inception of a lease. In this way, technical problems arising from lack of concrete knowledge of the terms and agreement stipulated in the lease contract can be avoided. It is therefore important to determine the exact contents of the agreement including the duration, the residual value and every provision in the lease agreement not only to avoid technical problems but also to reduce expenses by negotiating with the lessor potential options. Fishman (2008) aptly stated that determining how long a lease lasts will determine whether you can currently deduct expense or have to deduct it over the entire leased terms (p. 187). Furthermore, in case the lessee opted to buy the property at the end of the lease contract, determining the residual value of the property beforehand, can help the lessee decide whether to buy the leased property or to purchase brand new.

In terms of audit and assurance, going concern assumption is a management assertion where an entity is perceived as continuing its routine business operations in the foreseeable future (which is an accounting period usually 12 months). ISA 570 is the auditing standard issued by the International Auditing and Assurance Standards Board (IAASB) which explains the requirements necessary for verification of the going concern assumption.

ISA 570 states that  When preparing and performing audit procedures and in evaluating the results thereof, the auditor should consider the appropriateness of managements use of the going concern assumption in the preparation of the financial statements and consider any relevant disclosures in the financial statements (as cited in Redrafted ISA 570 issued by the IAASB)

Auditors responsibilities

Auditors have numerous responsibilities when considering the appropriateness of the going concern assumption for instance

To look for any material uncertainties regarding the going concern assumption and the need to disclose them in final accounts if any.

Similarly, they should look for any events, conditions or other relevant risks which may cast doubts over an entitys ability to continue as a going concern.

The procedures used by management to ascertain as to whether the entity is a going concern also needs to be assessed.

Possible indications of going concern issues should also be looked into in detail for instance financial, operating or other indications.

Going concern assumption used by management also needs to assessed.

The assessment period in use by the management should also be considered, and in case if its less than twelve months then auditors should ask the management to extend the assessment period to 12 months.
Managements future action plans also need to be considered.

Audit procedures in connection with ISA 570

As per ISA 570, Auditors are specifically required to carry out the following audit procedures

Review managements future action plans in contrast with its going concern assumption. Moreover auditors should also seek to obtain written representations from management regarding their future plans since their action plans are a mere forecast and hence potentially uncertain.

Cashflow, profit and other relevant forecasts also need to be discussed with the management and analyzed whether they adequately reflect the entitys ability to continue as a going concern.

Similarly, an entitys latest interim financial statements (also known as management accounts) probably for the last quarter should also be discussed with the management in order to obtain a better understanding which would subsequently assist auditors in their analysis.

Terms and conditions of debentures and loan agreements should be reviewed as well since they will provide significant insight into companys leverage position and hence bring to light if the company is or will face problems in discharging its obligations which could cast shadow over its functioning as a going concern.
Minutes of AGM, EGM (if any) or any other board and committee (i.e. audit committee, remuneration committee) meeting should be thoroughly read. There is empirical evidence that board minutes have been instrumental in providing references to financial difficulties.

An entitys legal personnel also need to consulted and information about any litigation or claims which could significantly affect its going concern assumption should be obtained. Such cases not only be reviewed independently by the auditors but also discussed with the legal counsel in order to fully understand the gravity of the matter.

Arrangements with related and third parties should also be confirmed for their legality and the ability of such parties should be assessed whether or not they can provide financial help.

ISA 570 further guides auditors on in determining their audit opinion after performing audit procedures on an entitys financial statements. Following are the types of opinion an auditor can express owing to the different types of situation. (Elearning.com, n.d)

Reporting and types of opinion

Emphasis of matter
Instances where material uncertainties are found and management agrees to disclose them in their financial statements, then auditors will give an unqualified opinion but include an emphasis of matter para which will briefly mention the situation and guide to a more detailed note in the financial statements.

Adverse opinion
Instances where material uncertainties are found and their magnitude is such that even disclosing them in the financial statements cannot allow the entity to present its financial statements on the going concern assumption will call for an adverse opinion, since it will not be able to function as a going concern.

Disclaimer opinion
Instances where material uncertainties are found and the management refuses to disclose them in the financial statements, then the auditors should express a disclaimer

However ISA also guides that auditors should extensively discuss the matter with the management and try persuade them to make appropriate disclosures before deciding to give a qualified opinion.

Proposed changes and developments in ISA 570
Owing to the evolution of business methodologies, auditing requirements also need to be updated with the passage of time. Hence the IAASB issues exposure drafts (ED) for its auditing standards when recommending or proposing any modifications to a standard.

In February, 2007 IAASB issued an ED on ISA 570 Going Concern which introduced changes which were largely focused at increasing the clarity of the standard in order to make it more useful for auditors to implement the standard.

Huge corporate failures over the years for example that of Enron and WorldCom among numerous others have forced the IAASB along with other professional bodies to consistently update their standards such that they are more reflective of the prevalent business practices and are effective enough to verify an entitys financial performance. (Accaglobal.com, n.d)

Proposed Modifications
Increased guidance has been provided for smaller or unlisted entities and public sector or government funded entities. Although smaller entities or public sector entities do not have a statutory requirement to follow ISA 570 or any other auditing standard but adherence to the standard can result in improved and more accurate reporting.

It has also been proposed that public sector entities particularly those which are funded by the government, would be required to follow this standard where there funding is discontinued.

Moreover the ED has also provided guidance on circumstances where an entity cannot continue as a going concern and hence cannot present its financial statements in that manner. In such circumstances, an entity can prepare special purpose financial statements which would be more accurately reflective of their situation (IFAC, 2007)

Further emphasis has been made on performance of risk assessment procedures. Auditors are now increasingly required to perform risk assessment procedures in order to provide greater insight into the adequacy of an entitys internal control function. (ICAEW, April, 2009)

Criticisms of the changes made
The ED on ISA 570 has received both positive and adverse views for different factions of the business community.

Pubic sector and smaller entities are an important part of the business community and therefore they should be provided necessary guidance on using the going concern assumption. Application and Other Explanatory Material section has although been adequately explained for public sector companies but such consistency is not found for smaller entities and has therefore been subject to criticism.

Similarly, the importance of risk assessment procedures in evaluating an entitys going concern ability has been heavily criticized for the wording used, which is largely misleading and in fact has made the importance of risk assessment procedures secondary to the evaluation of managements assessment methods when they should considered independently. (CGA-Ontario.org, n.d)

The evaluation of a managements assessment method has been discussed in more than two places and is therefore considered  unnecessary when it could have been shown in A  OE sections of the ED.

Auditors responsibility to correct the lack of analysis on managements part is too much of a secondary nature matter and therefore it should have been included in the AOE section, since its misleading here. (Accaglobal.com, n.d)

Adverse opinion is usually given when an entity can not continue as a going concern whether or not appropriate disclosure is given, wording used by the standard in explaining this matter has been criticized for being excessive and misleading.

Similarly, guidance on audit opinions have been discussed more than once and due to this repetition it has greatly affected the readability of the standard hence giving rise to ambiguity.

Communication of audit matters with directors of an entity is although essential but not a constituent of the core requirements of the standards.

In the wake of the global economic crisis which caused financial distress around the globe resulting in pre-mature closure of companies which had been performing extensively well prior the credit crunch. Such instances resulted in unanticipated losses for millions and brought the accounting and auditing profession into spotlight for not doing enough to prevent such abrupt bankruptcies and liquidations which cost a fortune to many. (Accaglobal.com, 2008)

Therefore in a report issued by the ICAEW it was emphasized that increased guidance is provided to directors in order to assist them in evaluating their entitys appropriateness as a going concern.

The report also emphasized the need to update the going concern standard on a more consistent basis so that they remain in line with the existing business practices.

Moreover this report also highlighted the need to delete parts of the standard which were getting repetitive or increasingly irrelevant with the changing business scenario. (ICAEW, 2008)

Conclusions
ISA 570 provides a detailed guideline for both auditors and management alike in determining an entitys ability to continue as a going concern.

Furthermore, they extensively determine the responsibilities of both auditors and management in determining the appropriateness of the going concern assumption.

Similarly, relevant audit procedures and suggested management actions are also mentioned in detail.
Moreover the proposed changes made to the standard have improved the clarity of the requirements and subsequent actions when evaluating the appropriateness of the going concern assumption.

Recommendation
Considering the discussion above, it can be suggested the ISA 570 should be more specific in determining audit requirements. This will help auditors in designing their audit procedures in a likewise manner.

Discuss the corporate culture at WorldCom and how it contributed to the accounting fraud.

WorldCom started expanding a lot because of which the different people in the organization became very distant. People did not know others in the organization because of which the communication became very weak. Each department had formed its own culture and they were following it.

The culture was very bureaucratic and all the communication was top to down. The lower level of management was given the authority to question the seniors in the organization. The employees were expected to do whatever their higher staff told them, no matter how unethical it was. The people were not awarded on the basis of merit. The employees also felt helpless and did not know who to talk about their problems.

Such practices in the culture of the organization encourage people to hide information and do not disclose it. People who were bothered to report activities were not given the authority to raise their concerns. They did not know who to contact and where to express their concerns. The environment was such which supported the activities of misrepresenting information. As a result, the accounting information was incorrectly stated which resulted in the accounting fraud.

Discuss how the CEOs desire to be the 1 stock on Wall Street contributed to the fraud.

According to the CEOs desire to be the Number 1 stock on Wall Street, the employees in the organization set their eyes on increasing the revenue. This was the only way the price of the company shares would increase. In order to gain this goal of increasing the revenue, people started doing whatever they could. They started spending and making investments which were not beneficial for the organization in the long term. They entered into long term fixed rate leases for network capacities in order to meet the increasing demand of its customer base. The broader picture was ignored which led to the fraud. The demand for telecommunication later on fell and during the time it was low, the company was paying for these leases for no reason. Some companies left the industry and the ones that stayed reduced the prices so much that WorldCom was forced to match. The company tried to maintain the Expense to Revenue ratio and in this attempt, it used accrual releases and expense capitalization which are accounting tactics used to achieve targeted performance.

Given the pressure on Accountants to book and release accruals to meet expected results, how might an Accountant go about handling this type of situation

This is a very complicated situation which often puts people like these accountants in a very difficult situation. There is a dilemma and the people have to make a choice. Each choice will have a different result. What choice the person makes depends from case to case. In such a situation where there is pressure from the higher ups, a lower level employee can use a method called whistle blowing. In this method, the lower level of employee contacts anyone who can be of help if he or she feels that there is some wrong happening in the organization (Kietzman, S., 2003). However, it is very important that the employee knows the right person who can be told in such a situation. When using whistle blowing, there are a number of factors that need to be kept in account. These include the seriousness of wrong being done in the organization or whether an action will be taken against the person doing the wrong or not.

Whistle blowing can be done internally or externally. Internal whistle blowing is when an employee tells someone about the wrong happening in the organization within the organization only. For instance, if an employee tells another employee about something wrong happening in the organization, it would be internal whistle blowing. On the other hand, we have external whistle blowing. This is when the employee tells someone from outside the organization about something wrong thats happening within the organization. An example of this could be informing the law enforcement agency about something wrong happening in the organization (Kietzman, S., 2003).  

Discuss the pros and cons of whistle blowing. Would you be more likely to blow the whistle or not Explain your answer.

Although it seems like whistle blowing does not have any pros, it is not the case. Firstly, whistle blowing allows once to have a clear conscience. When you know that you did whatever was in your hands, you feel relieved. In addition to this, it makes people around you believe that you will always deal with situation honestly, no matter what. In short, it would make you and others feel good about yourself (Young, A.S, 2002).

On the other hand, there are also drawbacks of whistle blowing. When an employee reports of something wrong happening in an organization, the guilty person might take an action against that employee which may harm him or her. Getting threatened, mental pressure, being intimidated are some of the very few outcomes of whistle blowing (Young, A.S, 2002).

It takes a lot of courage to blow the whistle and because of this many people do not do it. The bitter fact is that it is never a safe move. When an employee points out something wrong that is taking place within the organization, it could always backfire and the employee will not get anything out of it. However, when someone has faith in their decision and themselves, they do not hesitate.

As mentioned before, I would consider a number of factors before I actually blow the whistle. I would have to keep in mind whats at stake. Only once I have weighed both the sides, I will decide whether I will blow the whistle or not. Therefore, my response to this is very situation specific.

Discuss the creditability of the Accounting Profession when Corporate fraud is unveiled.

When people talk about corporate frauds, the accounting department is mostly in one way or the other way responsible. This often makes the people believe that the accounting profession is not credible. It is true that the accounting personnel have a lot of chances of committing fraud and this is what makes the profession so difficult. There is this trust that needs to be developed and then only the employee can properly form.

There are a number of restrictions that accounting personnel must follow and standards that they must meet.  One relevant to the case concept that is often used is Statements of Financial Accounting Concepts No. 1 which is Objectives of Financial Reporting by Business Enterprises. According to this, financial reporting is always done for an objective. In this case, financial reporting was misrepresented in order to make the companys reality different from what it actually was (Financial Accounting Standards Board, 2008).

Statement of Financial Accounting Concepts No. 5 which is Recognition and Measurement in Financial Statements of Business Enterprises is another statement that applies to this case. This statement outlines what information should be included in the financial statements and how this information should be measured.

I do not think that the existence of corporate fraud would affect the credibility of the profession as a whole because this would be stereotyping. A lot of corporate frauds are done by people in other departments therefore it does not make sense to doubt their credibility. Therefore, corporate fraud like the one at WorldCom does not affect the creditability of the accounting profession to any extent.

Key term 1 Job-order costing system

This is a costing system where an organization is producing different components to assemble a particular product. It is also applicable where the organization produces different products each period. The system is used where the products being manufactured are big enough such that the costs of each component can be estimated. This method is mostly applicable where the customers make orders of a particular quantity of products. It is also applied where the company is producing products by incorporating different parts from different processes or suppliers. Each job is valued according to the costs involved (Lewis, 1993).

The entire system of manufacturing the product is evaluated to determine the total costs of the product. The variable costs are calculated to determine the amount used on each particular item. The fixed costs are distributed equally among the jobs to estimate the actual costs used to produce particular products. Each stage of production is evaluated to determine the costs involved. The value of the product is calculated at each level to determine the value added to the item at each stage. The costs are distributed according to the stage of production and the profits can be evaluated for each stage of production. Costs centres can be established using this method of costing and this enables the organization determine the actual costs of producing particular items. Profit centers are also determined to evaluate the departments which create profits to the organization (Lewis, 1993).

Job order costing is used in all types of businesses. The service industry uses this system to accumulate the costs to account and bill the services provided to the customers. The International Standards of Accounting gives the procedures of computing job order costs for both manufacturing as well as the service industry. The job order costing system evaluates the direct materials, direct labour and overheads used in manufacturing particular products. The disadvantage of this method is that some processes may be overvalued or undervalued when estimating the manufacturing overheads. The direct materials and labor can be easily determined since solid figures are recorded by the firm (Antos  Brimson, 1999).

Through this system, all costs are traced to the particular jobs. The costs of the job are divided by the number of units in the particular job to obtain the average cost per unit. The process of cost assignment should be carefully done to avoid assigning costs to jobs not processed by the system in a particular period of time. Record keeping is important to ensure jobs are costed accordingly. Companies producing different products have a big task to separate all the costs involved in producing each particular product. Companies producing a single product have a simpler duty since the costs can be determined more easily (Lewis, 1993).
An example of an organization using job order costing is Vilas-LaMesa Company. The web link for this information is accountingformanagement.com. Vilas-LaMesa Company has provided the General and Factory Ledger for the two products produced. The costing for each product has been given to determine the costs as well as the profits for each product. The two products require two raw materials. These costs have been computed to show the distribution of costs to all the departments (Lewis, 1993).

Key term 2 Variable costing

The variable costing system treats the costs of production that varies with the output as product costs. The fixed manufacturing costs are not considered in the computation of the product costs. The variable costs of production are direct materials, direct labour and the variable overheads. The fixed costs are considered as period costs and are not included in the computation of the total product costs. The cost of goods sold does not reflect the fixed overhead costs. Some authors call the variable costing system the marginal or direct costing system. Selling and administrative costs are not considered as product costs. The fixed costs are expensed in the period they were incurred (Hussey, 1999).

The advantage of this system is that the data for Cost Volume Profit (CVP) analysis can be obtained from the variable costing computations. Under this system, profits for particular period are not affected by change in inventory. The profits are related to the sales under the variable costing holding other factors constant. This system of cost accounting creates emphasis on the impact of fixed costs. The total fixed costs are given on the income systems but they are not absorbed in the total product costs. The costing system makes it easier to evaluate the actual profitability of each product, customer and other departments of the organization. Fixed costs do not contribute to the actual profits of the organization and to include them in the total costs will give an obscured profit. Variable costing is useful in applying cost control methods. Standard costs and flexible budgets can be computed easily using the knowledge of variable costing (Antos  Brimson, 1999).
Variable costing system is used for internal management only. Some of the uses of this system are determination of income, valuing inventory, cost analysis, Break Even analysis, Cost Volume Analysis and making short term decisions. External reports do not require the use of variable costing system (Hussey, 1999).

This system has the disadvantage that the manager assumes that variable costs are composed of the unit product costs. Unit product costs are made up of both the fixed and variable costs. The system of variable costing does not include variable costs in the computation of the total costs. Therefore, this system becomes inefficient in displacing the fixed costs from the total product costs (Antos  Brimson, 1999).

An example of a company using variable costs is Daimler AG. The website link for this information is principlesofaccounting.com. The company manufactures vehicles and uses the variable costing system to determine internal decisions. The fixed administrative and operational costs are not used to determine the variable cost. The company has used this system to determine the value of its inventories. The German company has been successful in application of this system (Hussey, 1999).

The AICPA its Mission, Roles, and Current Activities
The American Institute of Certified Public Accountants (AICPA) is a national organization whose main objective is to enrich accountancy as a profession. With certified public accountants constituting its regular membership, AICPA serves as the guiding arm of the professionals in the accounting profession. Starting with a handful of members, the institute has now grown to more than 300,000 members in its different membership categories (Bradford, 2008).

History
The history of the American Institute of Certified Public Accountants (AICPA) dates back to 1887 with the establishment of the American Association of Public Accountants (AAPA). By 1916, its membership of 1,150 changed the name of the organization to Institute of Public Accountants (IPA). Then another change of name occurred the following year, 1917. This time, the organization took on the name American Institute of Accountants (AIA). Meanwhile, in 1921, a federation of societies of accountants in the different states was organized  the American Society of Certified Public Accountants (ASCPA). When the ASCPA was eventually absorbed by the AIA in 1936, the latter also decided that from thereon, only certified public accountants (CPAs) would be accepted into its membership. The organization kept its name until 1957 when it finally decided to take its current name American Institute of Certified Public Accountants (AICPA).

Mission and objectives
As the national organization of certified public accountants in the United States, it has committed itself to the task of serving the interest of its members, in particular, and safeguarding the public interest, in general, by enhancing accounting as a profession. To do this, the organization first equips its members with all the information and resources they need and then provides the leadership so that certified public accountants could serve the public in the most professional manner. Towards this end, AICPA is working closely with the organizations of CPAs in the different states (The American Institute of Certified Public Accountants, 2010).  
In laying down its objectives, AICPA identified the five major areas it considered vital to the accomplishment of its mission, namely advocacy, certification and licensing, communications, recruiting and education, and standards and performance. The first objective of AICPA, therefore, is to provide effective representation to the countrys CPAs. This is deemed important so that the rights and interests of its members vis a vis the different levels of government, regulatory commissions, and other institutions and organizations, could be safeguarded. Secondly, the organization seeks to protect the reputation and credibility of its members by working for the highest standards in licensing and certifying CPAs in the United States. The third AICPA objective is two-fold. It aims to develop and strengthen the trust and confidence of the American public on CPAs by emphasizing the latters integrity, objectivity, competence and professionalism. Then it aims to maintain adequate internal communication so that it is always aware of the requirements and opinions of its members. It is also an objective of AICPA to conduct intensive educational campaigns for the purpose of encouraging promising individuals to join the ranks of CPAs. Likewise, the organization aids educational institutions in developing their academic programs. The last objective of the institute is to work for the establishment of the highest standards for the accounting profession and consequently enjoin its members to adhere to such standards. In this connection, AICPA provides its members with all the help they need so that they could continue to improve their expertise and be able to strive for better performance and act in the most professional manner (The American Institute of Certified Public Accountants, 2010).

Membership
There are currently eight membership categories in AICPA. These are the regular, associate, non-CPA faculty associate, international associate, student affiliate, CPA candidate, non-CPA section associate, and voluntary membership categories. To qualify for a regular membership, one should not only pass a uniform examination for CPAs designated by the institute but should also obtain a certificate to practice as a CPA from a duly constituted United States authority. Applicants are required to pay an enrollment fee of 65 while the membership dues vary with the members industry and his or her status in said industry. If an applicant who has already passed the uniform examination for CPAs but has not yet obtained a certification to practice from his or her state, he or she would be considered for associate membership. The same enrollment fee and membership dues being charged to regular members are applicable to an associate member (The American Institute of Certified Public Accountants, 2010).

The non-CPA faculty associate membership is open to those who have not passed the uniform examination for CPAs but who are teaching accounting in the universities and colleges. Although they have no voting rights, they are required to abide by all the Bylaws of the institute and adhere to its Code of Professional Conduct. To help them in their profession, the institute provides them with the tools, techniques, and resources which would enable them to improve their methods of teaching and keep them updated on developments in the accounting profession. Even if they have no voting rights, the same enrollment fee and membership dues apply to them. Meanwhile, the status of an international associate member is open to members of International Federation of Accountants (IFAC) in other countries who are either certified public accountants, chartered accountants or their equivalent. To qualify, the organization of the applicant should be a full member of IFAC. Of good moral character, he or she should not possess a United States CPA certificate. Currently, however, the institute is not receiving applications because this category is under reviewed (The American Institute of Certified Public Accountants, 2010).

The student affiliate and CPA candidate membership categories are available for students (even only in their freshman year) to new graduates of accountancy who have yet to take the uniform examination for CPAs. By paying the membership fee of only 35, they could already enjoy many of the benefits available to the regular members of the institute. For instance, they could network with the other members and receive important information and other valuable resources which are only exclusively available to AICPA members. Examples of these materials are tutorials for the CPA examination as well as sample tests. Scholarships and training opportunities are likewise available to them (The American Institute of Certified Public Accountants, 2010).

Subject to AICPA approval, any CPA firm could sponsor any employee for non-CPA section associate membership provided said employee is not a CPA. The requirements for membership include a bachelors degree acquired from a duly-accredited university or college and an agreement to abide by the Bylaws of the institute, besides adhering to its Code of Professional Conduct. The sponsored applicant should also have met the requirements for membership in public accounting. The same enrollment fees and membership dues charged to regular members are applicable to non-CPA section associates. Finally, the voluntary membership category is open to all AICPA members. There are four sections which cater to specialists in four fields, namely Information Technology, Tax, Personal Financial Planning, and Forensic and Valuation Services. The institute has especially designed these voluntary sections in order to help its members who are specializing in these areas (The American Institute of Certified Public Accountants, 2010).

Activities
AICPA has been very active in producing materials which are valuable to industry practitioners, having been credited with more than 700 publications to date. Among its products, some of the most popular are Audit  Accounting Guides, Audit Risk Alerts, and Checklists  Illustrative Financial Statements. It also holds conferences all year long all over the country, touching on such topics as accounting, audit and attest, business valuation and litigation services, career development, consulting services, economic issues, fair value measurement, financial management, fraud detection and prevention, international accounting, personal financial planning, practice management, and tax. A look at the calendar of the institute shows that between March and October, 2010, a total of 43 conferences have already been scheduled. Two conferences are scheduled for March, eight for May, a total of 17 conferences for June, and ten conferences are scheduled to be held in July. In August, the institute has scheduled two conferences and another three are supposed to be held in September. The last entry in AICPAs calendar of activities is a conference scheduled for October, 2010. The institute makes the conferences attractive by holding them in popular locations like Las Vegas, Orlando, Florida, New York, and Washington, D.C. (AICPA, n.d.).  

Conclusion
Membership to AICPA is a must, not only for certified public accountants, but also for other professionals and would-be professionals who intend to work extensively in the accounting profession. AICPA assures their professional success through its various activities and programs of assistance. For instance, the institute is conducting thousands of accounting seminars and more than thirty accounting conferences every year (AICPA Learning, 2010) and provides its members with easy access to very timely and relevant information about the organization and the industry as a whole and  much needed resources like magazines, newsletters, and other publications  a complete AICPA Library could be found at the University of Mississippi (Goliath, 2003).

There are many problems of globalization one of them being the interaction between the different systems of taxation with the economies of the world. Economic Co-operation institute and development organization has started various projects which takes into account the partnership of international tax to give a forum aimed at the exchange of information and deliberate on policies of tax among the member states as well as the no-members. A member like the United States is involved in the projects by the organization. This is a very important step by the US because it is the universal superpower that is remaining. Therefore, its role is very crucial.

Globalization in modern world systems is taking a centre stage and a significant role in the economy. The process is becoming rampant and unstoppable. Globalization helps expand our views about the rest of the world through international agreements in trade. Globalization is very important as it encourages free trading. Moreover, it helps in the elimination of things like tariffs creation of free zones of trade with little tariffs or absolutely no tariff. Reduced cost of shipping and controls of capital are also evident in a globalised economy. These help in boosting the economy of the people and their nations at large.  There are many factors that promote globalization process. Among those factors facilitating the process of globalization is the international system of taxation. This is because globalization leads to the elimination of some barriers in economy and finance. As a result of this, tax differentials that exist between countries and states become major concerns. Globalization therefore can be hampered by the differentials of tax. This is because trading and investment across borders can indeed be affected depending on the system of taxation employed.

Therefore, tax competition needs to be reasonable, transparent as well as instituted in a manner that every country gives aid to countries in the process of putting in force their regulations and rules of taxation.  The most important aspect here pertinent to taxation is the idea that the payers of tax are in a position to trade and invest across borders while receiving good benefits in tax. There are two taxation systems which can be instituted here the worldwide system and the territorial system of taxation. A worldwide taxation system is one that has policies that cut across all countries in the entire world. The territorial system policies of taxation are limited to a particular territory such as a country, province or state. The following paper promotes the benefits of a territorial taxation system with moderate anti-abuse rule over the worldwide system of taxation in a globalised economy.

International commerce
There is no actual agreement concerning the correct division of tax base in the global set up. Moreover, there is no a guaranteed principle of exercising fairness that can be applied to bring a justification of a specific pattern of revenue distribution. The present system of division has come to existence accidentally along the process of eliminating a double taxation. The current system of taxation is majorly a result of the several double systems of taxation accords that were acquired over duration of about sixty years ago.  The worldwide system of taxation was designed by the huge capital-exporting nations and in current world systems, the system has been found to execute unequal operations. The worldwide system operates to the injustice of countries that are principally capital importers. The US utilizes both systems of taxation. In 2003, the revenue collected by the US formed 43.3 from corporate and personal income taxes.  The rest of the G-7 nations got 30.5  from the same. Revenue earned in the US from services and goods was only 18.2 of the total revenue from the rest of the taxes. The figures seemed to be very marginal compared to those of other countries in the G-7 who collected 26. The incorporation of the global system of taxation seemed to work to their disadvantage and that is why the US went ahead to oppose it.

Most of the capital-importing nations apparently are the developing countries. The introduction of a territorial system aims at effecting redistribution to the advantage of the developing countries. This was in the effort of creating a balance which is desirable in promoting a kind of vertical equity in all the countries. The worldwide system allocates cross-border revenue taxation taking into consideration the taxpayers origin as well as the income source leading to double taxation. The rules of governance are found in the domestic laws of tax as well as in bilateral treaties of tax.

The modern regime of tax allocation through the worldwide system is not put on a real unanimous agreement of all nations and therefore it cannot be made reasonable through any guaranteed principle of equality. The process however is in favor of the nations and countries that export capital. The capital-exporting countries are the ones that came up with the system and its rules which apparently favor them. Redistribution is therefore necessary through a territorial system to favor the developing countries. This will be very crucial in promoting the equity between nations. This will be achieved only through reasonable tax base allocation. The US council on matters of global business in 2004 was of the view that the worldwide system of taxation was not promoting fairness in the world trade. This forced some of the US companies to extend criminal acts of bribery to evade the foreign tax.

Worldwide revenue sharing in the sense of foreign investment taxation is an issue of exercising equity amongst the nations of the world. However, this issue has very little to do with the private sector. The greater concern is for the nations in particular that are involved. It equity between nations is realized in the equal sharing of the tax revenue amongst the nations. This in other words can be referred to as intra-nation equity. This again could be termed as the distribution of the competence in relation to tax amongst the nations. The territorial system promotes inter-persons equity. This is simply the sharing of the burden of tax by all the tax payers in a particular state or nation. The tax payers are directly involved in the inter-individual equity and the global neutrality but not necessarily by the inter-countrynationstate equity (Niles, 2004). The debate carried on between the US department and the Economic Corporation where the US is a member state highlighted the importance of having territorial system because the worldwide system was making the process of international trading complicated and difficult. The benefits of adopting a pure system of territorial system of taxation were purported in the discussion as a reasonable idea.

The territorial system is very useful as it helps in eliminating the barrier of inequities. The process allows close monitoring of the events involved in the taxation process. Unlike in a worldwide system which has a compromise of culture which may favor the nation depending on the occasion, the territorial system has uniform practice in culture and modes of practice. The United States for instance makes use one of the systems of tax based on the territory. This makes the companies in the United States to be able to defer the imposed tax gain from foreign profits for an indefinite time. In this light therefore, globalization through international commerce should not take the advantage developing countries by incorporating a plan that they cannot come by through the worldwide taxation system.

Anti-abuse rules
The system of taxation should be based upon the unanimous agreement of all parties involved in the international transactions promoting fairs to all, the income importing and the income exporting countries alike through better redistribution of revenue.

Standards and principles of neutrality shall not be fulfilled using a single set of rules of tax because either system credit or exemption, violates not less than one neutrality principles. The process therefore shall incorporate laws from both countries.

Foreign direct investment (FDI)
Foreign direct investment is the participation of a certain nation into another in a long period of time in matters of technology transfer, management practices, joint ventures just to mention just but a few. Foreign direct investment is a source of income to the people participating in the transfer of technology and other valuable practice such as management procedures.  Like in other methods through which globalization take place, the international systems of taxation also play a very significant role in the process of investing directly in a foreign country. Countries may experience what is known as global tax neutrality (stability) towards investment. This is a point where the taxation pattern does not disrupt the choice of the taxpayer in matters concerning home and foreign investment.  This is called for the reasons of global efficiency in the allocation of resources.

The economic growth of a country is greatly influenced by the globalization process through FDI. The competition in foreign direct investment is usually high. This is wholly depended on the taxation system of the destination country compared to the system employed in the mother country of investors. Utilizing a worldwide taxation system, the struggle for FDI is not effectively achieved because of a long process of trying to reach compromise by the members of the global system. This is unlike in a territorial taxation system which could easily give incentives to the country that wants to participate in delivering services to the client. The burden imposed through a global taxation system in FDI is much more compared to that which is negotiated on a territorial basis.

Inter-state equity between the host and home countries in matters of an equal share of both national loss and profit is provided in the territorial taxation system. The income of the tax payer which is gotten from international investment is inclusive as the countrys national revenue since the home nation has a preliminary interest in each and every taxpayer of their incomes and capital. The income tax which is therefore imposed by the host company consequently leads to loss to the home nation. The method used in preventing double system of taxation is the determining factor of whether a nation experiences treasury loss or revenue loss. When the home nation utilizes the method of exemption or method of credit, the tax of the host country diminishes the treasury of the home nation. This consequently leads to national loss to the home country. This home loss is a gain to the host nation because of this poor method of taxation employed.

The worldwide taxations system may prevent FDI and the entire process of globalization because of the complicated structure. The problem here will be that, the investors will shy away from being taxed both in their domestic country and the international country. Where competition in tax imposition is evident as far as FDI is concerned, a territorial system will be the best. This is because it is easy to adjust in the territorial system than in the worldwide system. In the United States, the worldwide system of taxation has made it hard to practice competition in matters of FDI. The global system gives little room for that and therefore it may be also difficult for an investor to go for an offer in the US.

The varied policies require different respective methods of restructuring in business where multinational management is needed. This takes into consideration the policies of taxation to be adopted at a particular time and their respective consequence on the business activities. Therefore, this will be a major setback in matters concerning personal taxes. This is because the nationals from many origins will be entitled to tax impositions in their mother countries. The territorial taxation process with moderate anti abuse rules is flexible in various occasions involving FDI.

When the countrys tax domestically is relatively high compared to other nations, the base of tax will be seen to shift to those countries experiencing fewer burdens in tax. This means that there will be outflows of FDI. However, through territorial taxation system, given countries could be seen to lower the rates of taxes to encourage investment inwardly.  The companies therefore involved in FDI will enjoy huge profits as a result. In making cross border transactions, multinationals face a lot of challenges where a worldwide taxation system is applicable. However, foreign direct investment shall be applicable within international business laws where the investor shall not be seen to benefit at the expense of the country in which they are working for.

Anti-abuse rules
The international tax agreement shall promote fair sharing of revenues of tax made available in the transactional business activities by both foreign and domestic taxpayers

The income of a nation countrystate shall be defined based on economic activities which would determine the entitlement of tax.

National Sovereignty
Many countries will be found to retain a level of sovereignty over the treatment of tax concerning their activities which generate income from abroad by their subjects. The country should develop the principles of supporting the residence tax entitlements of the country. One of the principles expected here is about paying allegiance to the economy. By this, the residents are expected to owe loyalty in exchange for the privileges and rights that they get as residents to that particular country. Moreover, there is the principle of being able to pay the tax sovereignty exercise over the foreign income source is very crucial to attain an equitable treatment of tax of the taxpayers who are residents by ensuring all income regardless of where earned subject to taxation consistent with the principle of accretion.

Another principle is that of benefit which the payment for productivity enabling benefits offered by the residence country to its production factors before the transfer to overseas as well as for the privileges and rights afforded the company corporation by its registration country. The interest of the entire nation is may be very useful in the determination of if capital outflow should be allowed or not. Most importantly, tax entitlement of the residence country is just residual. All the same, as a residual authority of taxing the country of residence has control concerning the absolute burden of tax of the foreign income source of its taxpayers who are residents. A system of exemption will leave the international income solely taxed by the country of source.

The credit system on the other hand will lead to tax payable to the country of residence only when the foreign tax imposition is lower. The source countries therefore are entitled to both revenue from income tax of gains within the borders as well as that from the foreign investment. This is referred to as the bedrock of the main global tax treaties. A nation is allowed share the foreign-owned production factors profits or gains which operate in its land, profits from cooperation together with the countrys inputs. These include natural resources, market proximity or workforce of whatever nature. In Inter-statenationcountry equity, the entitlement of source as well as the entitlement of residence has an equal footing. In the US which uses the global taxation system, the case for tax imposition is already predetermined and cannot go beyond certain levels. This shows how the rights of a particular nation could be infringed by the worldwide taxation system. In the process of taxation, certain rule must be geared towards avoiding harmful practices.  The nations and states making use of the territorial method of taxation shall therefore ensure transparency on matters pertinent to transactions in finance occurring in them.

Revenues of a state making use of the worldwide system of taxation may seem to be low compared to those making use of the territorial system. The harmonization process of the policies of taxation in a worldwide system may be difficult because of lack of the global cooperation. The competition of tax is intensifying and therefore the territorial system is playing a significant role in removing trade barriers and mobility of capital in both the domestic and international economy. The worldwide taxation system is found to endanger the revenues from tax by individual countries. Moreover, the process of harmonizing the taxation system to become a global one compromises the sovereignty of a nation concerning policies of tax.

For instance, the coming together of the Asian countries in south east through ASEAN came out very speedy in trade. The major idea behind the formation of ASEAN was to promote FDI from regions outside and also maintain a very healthy autonomy on matters of social, economic as well as policies of taxation. However, with the adoption of the Free Trade Area of ASEAN, there was a doubt that such patterns of competition in tax and harmonization would be evident in the future.

Worldwide taxation system has come up as a field of competitive play in which nations could lose or win investment and trade. It all depends on chances because of the competitive nature of the scenario created. This is not a new thing but rather a thing of the past. The stock proprietor is indeed a citizen of the world. It is not a must for them to be attached to a particular state or country. The territorial system in a globalizing economy can allow the proprietor to move his or her stock to a place where the taxation procedures are favorable to them. This cannot be achieved in a worldwide system and therefore interferes with national sovereignty.

The worldwide system of taxation will always tend to remove stock away from a specific country and in the end dry up the revenue sources of the nation and the entire society. This is because profits, rent for the land and labor wages will be driven away. This is all because of a poor taxation system which does not favor the globalization process. The taxation system therefore should be in support of the national sovereignty.  With globalization and technology advancement, one of the several manifestations is competition in tax.

Because of this increased competition to attract a capital mobility base, the rates of taxation rates would need to be reduced. The competition in tax can really be found in places where taxes can be reduced through shifting the capital from high jurisdictions of tax to low ones. A lot of resources are spent on techniques of tax-planning. It gives them hard time in minimizing the liabilities of tax. This is unlike in a territorial system which does not incorporate such long procedures of taxation.
Anti-abuse rules

All tax treaty rules shall be developed by countries of status, the income importing and income exporting alike.

As it pertains to treaty rules, business income as well as income gotten from real estate with an overwhelming tax entitlement on the source nation shall require that there be exclusive imposition of tax of such an income from the source statenationcountry.

All conflicts in inter-nationstatecountry tax shall be resolved by worldwide corporation as opposed to competition of tax where the inter-state equity would be the share of the source of country in international gain arising from within it.

Conclusion
The process of economic integration and general globalization has been for years now very crucial both in the development of individuals and the entire nation. Economic integration encourages free trade and the liberty to invest in any country of choice. This has led to raised standards of living through increased methods of getting income. Globalization offers an opportunity where there are no enough areas to invest in a particular countrys economy. Through globalization, countries have been able to trade internationally and promote the living standards of its people.

The globalization process also has been helpful to individuals who have the resources to invest in places outside their own country. It does not just come easy. The process of globalization has been influenced by several factors. Among these is the system of taxation applicable in the transactions of business that exist amongst countries in the process of economic integration. The process of globalization as portrayed here has been influenced by two types of taxation system. The paper has highlighted the benefits of having a territorial taxation system with anti abuse rules over that with a worldwide taxation system.

The need for equity must be taken with a lot of seriousness therefore. Inter-nationstate equity when allocating a base internationally in relation to entitlements of tax of each nation as well as re-distributing the income of the country with respect to justice in distribution must be dealt with seriously in the reforms concerning international tax because it offers a crucial and may be a major framework of policy than the neutralities principle to direct further reforms and also that the inequities in the worldwide system are very hard to justify leave alone achieve in the process of globalization. Equity of inter - nation offers a reasonable goal in reforms which help in reducing such like inequities.

DESCRIPTION OF THE COMPANY AND INDUSTRY
Starnet is medium sized company and is engaged in the production and sale of various electrical appliances that are for industrial and domestic use. The average life of the appliances sold by Starnet is six years. As per the norms of the industry all the products sold by the companies are to be covered under warranty for a specific time period.

SITUATION ANALYSIS
The company provides a warranty period of one year on all of its products. The terms and conditions of the warranty agreement include a free after sales service, including parts. Thereafter, all the services are provided at market rates.

The company is currently providing after sales services through a servicing consultant, Delta Inc. The terms and conditions of the agreement between Starnet and Delta Inc. are as under
For all the repairs carried out under the warranty period
The material required will be provided by Starnet.

Labor and overheads on services provided will be incurred by Delta Inc and will be billed to Starnet at cost plus a markup of 30.

For all the repairs carried out after the warranty period
The material required will be supplied by Starnet to Delta inc. at cost plus a mark-up of 15.

Starnet gets a share in all amounts billed to the customers after the warranty period. 10 share is received in respect of amounts billed to industrial customers and 15 in case of domestic customers.

DECISION FACED
The management of Starnet is now considering the possibility of providing the services directly instead of outsourcing them to Delta Inc.

The Following information was compiled by the management accountant of the company in respect of the previous year
20 of the services were provided to domestic customers and 80 to industrial customers.
Mark-up billed to Delta Inc amounted to  860,000.

An amount of  990,000 was received from Delta being the Starnets share of amount billed to the customers.
Total amount of material billed to customers by Starnet amounted  500,000. It has been estimated that the cost of material billed by Starnet, to the customers, is determined by applying a further mark-up of 25 over the amount billed by Delta.

It is estimated that the cost of labor and variable overheads will increase by 10, if the services are provided by Starnet. However, Starnet will not be able to pass on this increase to the customers. Moreover, a supervisor will have to be appointed to oversee the process, at a consolidated salary of  4,000 per month. Other fixed overheads will also increase by  2,000 per month.

MANAGERIAL ACCOUNTING PERSPECTIVE
The company should decide between rendering the repair services through its servicing consultant or providing such services itself by comparing the total actual cost and revenues under both the options.

However the choice of the decision will depend on clear identification of the relevant costs by the company.
The analysis of the relevant costs will include identification of the costs that are different in the alternatives or in other words ignoring the costs that are common under both the options.

The company should then use the total amount of revenue under each alternative to select the best among the two given choices, i.e. the choice that earns the maximum revenue for the company should be adapted by the company.

This report aims to help the editor of a professional journal to assure him or her the articles that are written and printed in the journal are up to the mark of the technical writing criteria. The article under review is Retain Clients and Help Them Recover by Larry Bildstein, a CPA, which was published in February 2010 in the Journal of Accountancy.

The main aim of this article is to help the editor know the weaknesses and strengths of the articles written for the journal. The article under review is specifically written for the companies that sell services to other companies which in turn develop and manufacture products.

The author Larry Bildstein, a Certified Public Accountant, has written the article to help the companies which are struggling in this weak economic time and has provided guidelines concerning the ways to increase or at least maintain the business. Though many times the author has used the activities of a CPA as an example but the same practices can be used by any other company to sustain its business.

The text of the article is not difficult for understanding for the readers. It can easily reach its purpose, because the readers can easily understand the structure. Sometimes, articles are written in such a manner or using such a language, that it becomes cumbersome for the readers to vividly see the purpose of the article. But the author of this particular article has managed to transfer the idea properly to the intended audience in a clear and concise way.

In my opinion, the article is in general well written, but it could definitely be improved by adding graphs and tables as they give a visual impact and help in understand the idea presented.

Another problem I have found with the article concerns the starting paragraph, which is confusing to a certain degree and does not contribute much to the explanation of the topic of the article. Thus, I was able to figure out what the article was about only from the main heading. There are a few other disadvantages, for example, the ideas are not very well logically connected and certain important terminology is introduced at wrong places. For example Grading your Client subheading came after mentioning the A and B clients in the previous paragraph, though it should have been introduced earlier to ease the further reading. Besides, the idea concerning the ways to attract new customers should have been introduced at the beginning

Developing an Argument
The article can be of interest for the companies and individuals specializing in providing services to the other larger organizations. These companies could be enterprise resource planning software manufacturers, network support or financial services providers, such as auditing staff or CPAs and people, working for the automobile producers and other heavy industries etc.

The author has positioned the ideas in the form of bullet points for the primary readers of the article discussing the ways they can retain their existing customers and encourage a more active cooperation with them. The ideas recommend the target audience to do the following forecast obstacles improve lender relationship, explain statutory changes, invest in I care time, conduct a cost-cutting review, discuss their fees, define excellent client service, communicate value proposition and be proactive. Although these ideas are very simple, but they are at the same time very effective and though provoking for the service companies who wish to do well in these economic times.

Therefore, the article very well meets the criteria of the audience, as it includes all the possible details, after reviewing and explaining the strategy to focus on the existing customers instead of trying to get new customers the author has described, how that could be achieved.

The author has used the structural patterns effectively to make the logical flow of ideas convincing, having applied proper techniques to achieve this goal. The author has very well argued that new clients would be difficult to get, because the business concerns are no longer interested in buying new enterprises, even if it could facilitate and enhance their performance. The reasoning techniques applied by the author make the article stronger.

The article is very persuasive the author has resorted to more than three criteria which make the argument convincing and appealing for its readers. The article has been written in a tone that appeals to the emotions of the readers, for example, taking into consideration that the economy is in a bad shape today, the author has devised and recommended a way following which the readers can make more money, which is definitely a reasoning method worth attention.

The author has critically considered all the possible viewpoints having although asked the readers to focus on the existing customers, but having also advised them concerning the ways to approach the potential new customers, i.e., through proper client referrals, strong networking and targeted marketing.

The author has correctly identified the elements of the argument and stated clearly in the initial part of the article what the purpose of the article is, and how the readers can employ the techniques to effectively make more money. The table which compares the possible revenue generation scheme from the new and the existing clients gives a clear picture that investing and working with the existing customers is a good idea in this bad scheme instead of trying to attract new customers.

Design Elements 
The author has used the headings effectively to meet the design features of the article the subheading within the start over serving your clients part of the article is well structured and can attract the attention of the readers easily and can help them use the article effectively if they are reading for themselves or making a presentation for their own company to modify the overall business strategy of the company. The way So Your Client Wants Lower Fees part has been dealt is also very attention-grabbing and retains the attention of the reader and in fact focuses his thoughts.

The title of the article is appealing and has the capability to seize the attention of the reader very quickly and so are the other headings such as Grading Your Clients, this part of the article specially can be used by the readers even if they are not interested in the overall article. Unfortunately the tools have not been correctly utilized some information such as graphs and data could have been used to project some figures and hence augment the reading.

The typography is good and helps the readers eyes to look at the main points and get a general idea before diving into the text as a whole, this further helps in the clear reading and understanding of the technical writings.

The page design is not effective, as in this format the article is not organized very well  there are large ads on the right side and makes the article difficult to read.

Conclusion
All things considered, the technical writing in the journal is on the right track and only minor changes are required. This article in particular has all the major elements to attract and keep the attention of the readers. The article has been written with much thought and has been organized to really help the companies who are struggling at the economic recession.

In a persons lifetime, it is in his pursuit of knowledge that he is given the opportunity to define the meaning and essentiality of his existence.  It allows him to be the individual who he aspires to be one who has the capabilities to adapt to the changing environs of the society, while at the same time being a positive contributor for the betterment of his community, be it locally or in a much wider scope.  This precept has always been my credo in my academic years, that it has taught me invaluable lessons in life to always seek for chances of improvement, and the importance of hard work in achieving ones goals.

My desire for self realization on things where I excel has led me to a career in Accounting.  My first job as a Staff Accountant in a CPA firm was a testament to my inherent skills in this field of expertise.  More so, I was opened to the truth on the importance of accountants in the corporateindustrial field, as we are the ones responsible for ensuring that certain important ethical principles are put into practice by the very corporations that make for our clientele.  This would likewise ensure that the proper benefits are rewarded to loyal and deserving employees, who had devoted much of their productive years to their respective companies.

However, I am aware that I still lack the necessary training to reach the optimal level of my potentials in my chosen field., thus, I have decided to embark on a mission to better equip myself with the best academic education offered by your esteemed institution.  With emphasis on taxation, as with the nature of my present work, I aspire to be educated under the expert tutelage of Georgia State University and be included in the elite list of students hoping to be able to earn a degree in Masters of Taxation.  It is in this specific field where I truly find my purpose in life.  Its wide array of responsibilities, such as in the creation and dissolution of corporations and filling up honest income statements for tax purposes are but some of the more meaningful tasks that I find very difficult to disregard.  It is therefore my utmost aspiration to some day be in possession of the commensurate academic skills necessary for my quest in assuring that all of the corporate entities under my influence implement the necessary ethical guidelines for the common good of the society.

As I have already been immersed in the field of taxation in my present career, I believe I can be an active and positive contributor to the academic society of Georgia State University.  My professional experiences and responsibilities, where I have been closely coordinating with other CPAs to produce income statements for corporate taxes, are lessons that I intend on sharing with my immediate academic environ.  I truly aspire that I will be given the opportunity to better equip myself with the best education that has always been the mark of your great institution, and further my knowledge for the advancement and the eventual betterment of the society that I belong to, through mastering the science of taxation.                          

Some companies might have some contentions on the current Generally Accepted Accounting Principles (GAAP) that affects their financial revenue recognition. The main purpose of this document is to present the significant effects of the current GAAP practices and to explain some points that might be an acceptable way of recognizing revenue to be effected on Financial Statements.

BODY
The Discussion paper gives some instances where a company might have different views on revenue recognition (depending on their industry type) which might not in accordance with the current GAAP or present practice.

The current practice recognizes revenue at the time of sale when the goods or services are being delivered or rendered. In other words, transfer of ownership from the vendor to vendee has been made. On this current practice, we must consider the collectibility of the revenue. The fact is already given, the transfer of risk and ownership has been made from the seller to the buyer, but what if collectibility is not assured on this transaction On this dilemma, some standards have been formed to recognize revenue on the basis of increase in cash, meaning, the transactions collectibility. Those standards clearly indicate revenue recognition when the transaction has been settled, where the buyer has paid to the seller the goods or services delivered or rendered.

The current practice also states that whenever there is an increase in the value of inventory, revenue must be recognized, even though there is no existing contract with a customer. This is true in some biological, agricultural, and extractive products. However, some entity recognizes revenue on the inventory-increase only if there is an existing contract with a customer. But still, some standards have contentions on this. Lets take for example a construction-type contract. First contention, if the activities continuously transfer the assets to the customer, meaning performance obligation has been satisfied and the control or ownership has been given to the customer, then the usual practice of revenue recognition must be considered. The second is the reverse of the first one, that is, if the activities do not transfer assets to the customer, performance obligation was not satisfied and no control has been given to the customer, then, the usual practice might change.

The presented Discussion Paper also states some issues regarding performance obligation. There are three categories here post delivery services, sales incentives and segmentation of a construction contract.

In the first category, lets take standard warranty as a common sample. The usual practice recognizes revenue at the time the product is sold where no warranty services has been provided yet.  However, the proposed standard on the Discussion Paper states that revenue must be recognized when the warranty has been rendered or provided, which is a clear indication of transfer of assets to the customer.

In the category of Sales Incentives, the usual practice recognizes the expense incurred as Marketing Expense rather than revenue. Lets take for example the free products or services given to the customer upon the sale of an item. The present practice treats it as Marketing Expense while the proposed standard based on this Discussion Paper clearly explains that the transfer of items (products or services given) to the customer is a revenue that must be recognized.

In the last category of Construction Contract Segmentation, separation of performance in contract components is allowed as long as it was pre-communicated with the customer. However, the Discussion Paper wants to directly point that each asset in a contract has separate performance obligations.

Uses of estimates play also an important role in the Discussion Paper. The usual practice does not recognize revenue until such time the selling price has been established. But here in the proposed model, estimating reliable selling price is significant to recognize revenue to be effected.

Lastly is the capitalization of cost. Since cost is important to recognize revenue (Selling Price vs. Cost Incurred), it must also be analyzed. The present practice capitalizes cost that is necessary to acquire a contract. But the Discussion Paper only recognizes it if they qualify for capitalization based on other standards (example, inventory cost and software development cost). If not, that cost will be expensed as incurred.  

CONCLUSION
The world of Finance and Accounting revolves around its standards. The common is the Generally Accepted Accounting Principles (GAAP) that must be followed to make the Financial Statement accurate and useful to the users. But still, some has their different views about the usual practice. It is really important not just to follow a rule, but also the followers MUST also understand what they are following, or if some contentions arise, it is really important to ask and research.

The Discussion Paper presented is really useful to make other followers (company or entity) of the usual practice think. Those discussions depend on their industry, what will be useful to them or whats not.

This is the general rule of the revenue recognition if there is a transfer of asset to the customer, its risk and ownership, then, revenue must be recognized.

This Discussion Paper is written not to confuse us, but to help us think whats useful to us or not. It also gives a review on revenue shown on our Financial Statements if they are accurate or not, close to reality or completely misstated.