The Statement No. 34 provide that managements discussions and analysis (MDA) should present a goal and a very clear breakdown of the governments monetary activities which are based on facts not assumptions, decisions, or conditions which exactly corresponds to the auditors report date and the management are aware of them. Sometimes observations on individual separate component units can be incorporated if necessary but in most cases, managements discussions and analysis relies more on the government. They always lay emphasis on current-year actions but sometimes when necessary use the previous years activities. Statement No. 34 emphasis flexibility in its formulation and also requires at least a minimum quantity requirements for the MDA.
With the introduction of statements no.34, a new age in governmental monetary reporting begun. Its advantage is that it stands to have the best existing financial reporting practice in the government. More to that, it gives the users additional and easier to use information which to my view enable them to evaluate what happen in the government. Still, the government continues to give out information that is useful to be used to access both the short and long term financial accountability (httpwww.gasb.orgstindex.html and locate GASB Statement No. 34).
On the other hand, statement No. 34 will entail costs on the governments on the process of its realization. However, GASB have come up with some amendments to be done on the expected exposure draft which aims at cutting the cost of its implementation. On my view, the best suggestion one can offer in controlling and minimizing the cost of its implementation is proper planning. One has to be conversant with the effects of this new mode of carrying out accounting processes in order to talk about planning. This then leads us to initially reading the whole document well and keenly.
I have always highly regarded the subject of accounting. I realized that it is an area that is interestingly defined by precise rules, well-structured principles, and axioms which make it much complex and intriguing yet at the same time, it is a platform to express oneself through interpretation and analysis. Due to these facets of accounting, securing a doctorate degree in this field occurred to me as a professional and academic goal that is worth contemplating. This is one definitive way to acquire theoretical and practical knowledge about the key concepts and methods of accounting, which in turn would be invaluable during later practice.
Logic, attention to details, and strong analytical skills are among the most important attributes needed in order to excel in accountancy. Nevertheless, passion for the subject and the ability to communicate effectively are also imperative skills to succeed in this endeavor. I can offer a number of these attributes, but certainly I am looking forward to learn and develop more skills that I do not possess at the moment, which I believe can only be gained through the program of my choice.
My propensity for learning is evident in my continuous strife for new knowledge. I have studied math, economics, and administrative management, which I believe gave me strong foundations to build on my pursuit to attain a degree in the field of accounting. My undergraduate education, where I have a majored in administration, equipped me with leadership and management skills. Meanwhile, my current masters program in economics, from which I am expecting to graduate this June, have exposed me in the areas of world economic trade, policy issues, and econometrics.
I have thoroughly enjoyed my undergraduate and masters education, as I have learned things that fostered my growth as an individual, and have significantly given me a greater sense of independence. However, I still wish to pursue a higher degree of education because the opportunities of having a degree in the field of accounting would further help me in advancing my career and attain self-development. The knowledge and skills that I have acquired from both my college and masters education have further motivated me to learn more and become more. By doing so, what I am about to attain with this degree would help me become more competitive in my future applications, and pave way for me to help other individuals who have the same pursuit as mine.
(Name of University) complements my desire to further my skills and know-how through the experiential education incorporated within their program, which would serve as a ground for me to strive hard enough in order to fulfill my aspirations. As I believe that I am an individual who is purpose-driven and has strong academic determination, the universitys program complements my individuality as well.
I hope that you have analyzed my piece enough to give me the opportunity to become a part of your (name of program). By working my way to the top, I know that the education and training that I will acquire from the program will be put to good use for my future practice. With all of these, I am ensuring the university that I am a good choice not only through my strong commitment in the program, but most importantly by laying strong interest and giving out significant contributions that I believe would be helpful for the institution as a whole.
When one wants get into a business, capital is one of the most crucial factors that are necessary for starting a business. There are different methods of acquiring this capital. It may be through leasing or through purchasing of the goods or the resources that maybe needed. By leasing, it means that an entrepreneur pays a certain amount of moneys so that he or she can enter into an agreement with another person who owns the resource. The one who pays is then allowed to use the resource for a specific period of time after which he is expected to pay another amount or stop using the facility. In this case, the one who leases does not have full ownership of the product or the resource. This method applies best to all those resources that are known to depreciate over time as the entrepreneur will not need to set aside some money for depreciation. (Rath, 2010)
On the other hand, purchase involves the actual buying of the resource or the good. In this case, the person who buys gains full ownership of the product or the resource and there is no agreement on the usage of the product or the resource. The person is free to do what he may wish to do with the product as long as he is through with the required payment. In case the product depreciates, the person who has bought it will suffer the loss. But at the same time, the person may opt to sell out the good or the resource since he has full ownership unlike in leasehold. (Rath, 2010)
Capital sourcing can also be classified under debt financing. This refers to the act of borrowing money from outside the organization with a promise of returning all the principle with the agreed interest level. This can be classified under lease form of capital acquisition or outsourcing. A good example of debt financing is getting a loan from the bank and then paying at an agreed period of time at an agreed interest. Another example of debt financing is a loan from a friend with a promise to pay within a specific period of time. (Rath, 2010)
Another form of capital sourcing for the organization is the equity financing. This is a case where an organization sells its shares to some interested parties or people. The people who buy the shares become part of the organization or rather gain some ownership rights over the organization. This means that they enjoy the profit that the company makes in form of dividends. It may also involve a person or the owner of the organization putting some personal money into the company. A good example is a case where a company offers its shares to the stock exchange so that it can get some money for operations which may be done through listing shares in the initial public offering. Another example is a case where a person or rather an entrepreneur puts his personal money or personal savings into the business so that it can expand. (Rath, 2010)
Equity financing is a more advantageous form of capital outsourcing over debt financing in that, there is no payback of the money with interest. Even though one stops being the full owner of a business organization in this case, there are more advantages in that there is no sharing of the huge profit that one may make while paying back the loan with interest. In addition, one is not obligated to pay the loan in case there is no profit made. This is not the case with the debts financing as the debts must be paid with interest whether the business organization made profit of not. Where possible, it would therefore be advisable to source the capital using equity financing over debt financing as it seems to have more advantages and more safer to the business organization or the entrepreneur. (Rath, 2010)
Northwest Bank Analytical Procedures Interest Income
Answers to the Questions in Par A
Q. As part of the year-end audit and using the analytical-procedure approach similar to last years audit (average loan volume multiplied by weighted average interest rate), determine if Northwest Banks interest income from loans reported at December 31, 2008 appears fairly stated. Do the results of the analytical procedures indicate that you accept 2008 interest income as reported
A. Initially, no, until verifications on how averaging was done can be evaluated as being representative of the volume of loans carried during the year. Analytical procedures are measures to determine the plausible relationships of the assertions in the financial reports. Average amount based on beginning and ending balances used to factor interest income by the interest rate is not conclusive if the volume and interest rate on loans during the fiscal year are volatile and unstable.
Analytical procedures are often used to uncover unusual relationships that can lead to discovery of misstatements for various reasons. In this case, acceptance can be made if average is made on the actual loan volume and rate based on weighted average for the year. Regardless of whether the same procedure (weighted average) was used the previous year does not allow automatic acceptance of the amount this year. Professional skepticism should guide the auditor in coming out with a better decision to accept or reject.
(Houck, 2003 pp. 105-108)
Q. Based on the results of the analytical procedures, how likely is it that 2008 interest income is materially misstated
A. It is safe to assume that the results of the analytical procedures may or may not be materially misstated, about 50. Auditors must conduct verifications first to determine whether the results of the analytical procedures are fair presentations of the amount. Objectivity is necessary in this regard. The auditor must check the degree of volatility of the loan volume as this may cause misstatements within the period. Simple average of ending balances may have likely been used to misstate, often overstate, the income as reported.
Q3. Please indicate on the scale below your assessment of the strength (quality and sufficiency) of evidence provided by the interest income analytical procedure.
The principle of conservatism and objectivity guide auditors in arriving at conclusions before they are finally reported. Frauds, errors and illegal acts may come in various forms and the auditor must explore indications that these are not evident in the books. The materiality of the interest income reported by Northwest bank all the more makes it imperative to be more substantive and objective. Analytical procedures provide signals of misstatements wherever they occur and auditors must be on guard for these as they are reported, especially for banks which may have a strong interest to overstate income. Based on the scale of assessment of strength, the evidence provided by analytical procedures is strong (rated 6 to 7) depending on control assessment.
There has been a lot of efforts made by the European Union so that there can be improvement in the financial market. To achieve this, they have seen it necessary to have transparency so that the investors can have the knowledge which is necessary while changing hands of financial assets. One professor from the school of Economics of Solvay Brussels believes that transparency is never there in the business field. He believes that the information that is released when transparency is demanded is just a small part of the whole information. This is the reason why the European Union is in need of making some new laws that will require organizations to give out all the information. (Fidler, 2010)
This is the only way that there will be healthy competition. The European Union is starting to have some effect such as the case that is happening in the LSE where the profit margin have fallen from 78 to 64 and this is a clear indication of growth in new competition. The European law however clearly understands that the price transparency is not all the time in the interest of the public. It is on this note that some economists argue that market makers should not at all be forced to indicate the price in the market earlier. (Fidler, 2010)
This article clearly demostrates the principles of full disclosure requirement put in practice. Among the main requirement of this principle is that the organisation provide information that is sufficient to the user so that he or she can make a sound decision. this article can be said to follow these requirements as we can find more information about the organization in the body of the article. Even though disclosure is not suitable for proper accounting, it can be said to work well in most cases as it ensures that there is transparency. This is the case that happens in this article. Through full disclosure, there it a growth in competition in the stock exchange company.
In conclusion, even though there seem to be some exceptions which happen to be very difficult to distinguish, there is a need for transparency in the market. This is the only way that there will be healthy competition. In addition, it is the right of all the key players in the market to have access to all the information that they may need concerning the business. Through transparency, it is possible for the growth of competition in the market. A good example is this case of the LSE reduction in profit margin as a result of growth in competition. After all, this is the only way to avoid exploitation which may result from lack of transparency. However, it is important to say that there are some other key factors in the market other than transparency and therefore transparency is just but one of the key facts that is necessary for a smooth market.
Q2. Which standard-setting bodies have reasonability for establishing accounting and report standards for the following
State and local Governments
Ans Governmental Governmental Accounting Standards Board (GASB)
Business Organizations
Ans Financial Accounting Standards Board (FASB)
Not-for-profit organizations
Ans Governmental Governmental Accounting Standards Board (GASB)
Nongovernmental - Financial Accounting Standards Board (FASB)
The federal government, its agencies and its departments
Ans Federal Accounting Standards Advisory Board (FASAB)
Q4. Explain how the GASBS 34 reporting model meets financial report users needs for operational accountability information about governmental activities.
To meet the financial report users need for operational accountability information about governmental activities, GASBS 34 reporting model requires governmental funds to prepare a Managements Discussion and Analysis (MDA) and two government wide financial statements, namely
Statement of net assets or a balance sheet (also referred to as statement of financial position)
Statement of activities (an operating statement)
GASBS 34 require both government wide financial statements and fund financial statements.
Q6. Which expenditure of a capital projects fund should be capitalized to Construction Work in Progress Is Construction Work in Progress included in the chart of accounts of a capital projects fund If not, where would it be found
Construction expenditures under a capital project fund shall be capitalized to Capital Work in Progress (CWIP).
CWIP is not included in the chart of accounts of a CPF rather it would be found under Governmental activities in governmental funds.
Q7. Explain the essential differences between regular serial bonds and term bonds and how debt service fund accounting differs for the two types of bonds.
Differences are as below
Regular serial bondsTerm bondsMaturity of the principal is in annual installmentsMaturity of the principal is at the end of the term of the bond in one lump-sum amount.Approximates the total resources(budgeted revenues or inter-fund transfers) raised each year with the debt service requirements, thus keeping the investments to a minimumDo not approximate the total resources with debt service requirements, rather they are budgeted to meet the sinking fund requirements and interest payments for the year.They are self amortizing, hence they do not require a sinking fund to be created.They require creating of a sinking fund.Management of investment and accounting for serial bonds is simple.Management of investment and accounting for term bonds is complex.
Debt service fund accounting is different from the above 2 types of bond as
Accounting is based on accrual method.
Both matured principal and interest on the amount of debt is usually recognized in the period due.
It focuses on the current financial resources.
Auditing Perspective
In accordance with the technological revolution that has taken place throughout the globe, even the simplest of business and commercial transactions are performed within the parameters of an automated computer system. Information technology has aligned itself with commercial activity in such a way that it has become an integral part of the international business community. Hence, with benefits such as convenience, enhanced data management and augmented information sharing etc, we have also been exposed to major risks such as Network Security, Access controls, lack of audit trail and data integrity etc. (Arens, Elder, Beasely, 2010).
Now that we have established the major risks that are present, we can move on to briefly describing them from an auditing perspective. Network security is primarily concerned with the protection of a particular organizations overall network, data and hardware from external intrusion. On the other hand, data integrity ensures that files and records that are being managed within an organizations storage are not subject to issues such as bad sectors, unreadable files etc. Both of these risks can, in principle, lead to the problem of a lack of audit trail in the sense that if network security or data integrity did not exist then particular transaction details would not be reliable enough. Moreover, automated systems inherently, in accordance with ease and efficiency, reduce the number of steps that are usually required for a particular transaction and can also take upon certain authorizations, which primarily come under the authority of particular personnel, automatically. Access controls are another important threat that needs to be countered because it is one of the first lines of defense against external intrusion.
However, automated computer systems have inherently helped us to manage our data and tasks far more efficiently than any other invention. An automated system can expedite a large number of transactions, thus saving time, while also centralizing tasks in such a way so that less man power is required. This basically allows organizations to focus and develop specialist skills. The fact remains that while automated systems present more security threats, we must also realize that technology is consistently improving and evolving. Hence, better security measures are in the process of and shall continue to be developed in the foreseeable future. Thus consequently, it can be concluded with certainty that although automated systems expose an organization to a large number of risks and threats, however, the benefits outweigh the risks from a considerable margin.
