StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Generally Accepted Accounting Principles - Research Paper Example

Cite this document
Summary
The "Generally Accepted Accounting Principles" paper argues that companies should inculcate various measures of mitigating fraud activities and the subsequent loss of potential clients and sponsors. They should involve the government, accepted accounting firms such as GAAP, and its internal controls …
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER96.2% of users find it useful
Generally Accepted Accounting Principles
Read Text Preview

Extract of sample "Generally Accepted Accounting Principles"

?Research Project Instruction: Task: Research Project Cases of fraud constantly dominate televisions, newspapers and radios because they have devastating consequences on organizations. For instance, it leads to loss of jobs, suspensions, jails terms and hefty fines for workers and managers found guilty of fraud related charges. However, the most shattering impacts of fraud include the freezing of company assets, loss of clients and sponsors and eventual longer jail terms for its top management (Bragg, 2008). In the same view, there are also lawful accounting firms such as the Generally Accepted Accounting Principles (GAAP) that is tasked with setting the precedent for corporations against fraudulent activities. According to the Generally Accepted Accounting Principles (GAAP), there are several inconsistencies with the five scenarios mentioned. For instance, it is the sole responsibility of GAAP to evaluate and account on the transactions conducted in the company. In other words, it ensures that is correct presentation of the business income and expenses of the corporation in relation to realized profits and losses. On that aspect, for instance, the lease on technology assets on inflated prices constitutes a violation of the GAAP rule of accountability. Additionally, there is also the breach of the principle of full disclosure/materiality (Epstein & Saafir, 2010). In this principle, according to the umbrella of GAAP, the leasing of technology assets should have been made public in terms of the transactions and the records of the sales. There is also the breach of the principle of sincerity. For example, in making understatements of e-commerce state the tax payments, the organization goes against the principality of GAAP that requires sincerity and honesty. Alternatively, this also violates the GAAP principle of regularity whereby a company should abide its sets rules and laws. The receivership of post-employment benefits by fictitious workers is also a sign of fraud in the organization. In accordance with GAAP requirements, the principle of non-compensation guards against the hiding of pertinent details that deal with financial information (Bragg, 2008). Therefore, there is an element of fraud because workers within the company are using proxies to award themselves heft payments. This is a breach against compensation by either asset or debt in the principle of non-compensation. Moreover, it also contradicts the GAAP principle of full disclosure that requires all financial information including payments and transactions to be disclosed in public through records. Another fraud that is apparent according to GAAP rules is that one involving the hiding of cash to help other future quarters. The earnings are meant to short change the expectations of an analyst in future reports. However, unknown to the corporation, this is a contravention of the principle of regularity that requires any company to conform to its stipulated rules and laws of financial transaction without making any monetary concealments (Epstein & Saafir, 2010). Furthermore, there is also the principle of utmost good faith that states that all the information pertaining to the firm should made public to its respective insurer before taking any policy. This is because such a move leads to shady dealings as one witnessed above to manipulate the judgment of a financial analyst. In the same view, there is also an element of fraud in the concealment of inventory shrinkage because it seems low for the industry. According to the GAAP rules, the principle of prudence if grossly violated and subjected to financial ridicule. The principle expects firms to abide with the reality of the company without making things look contrary to the reality. On that account, there should only be recording of revenue and inventory shrinkage when sales have been made at their disposal value (Harrer, 2008). Additionally, this move by the company also goes against the principle of full disclosure/ materiality that requires the making of all financial information of the company public. According to me, the Generally Accepted Accounting Principles (GAAP) rules not sufficiency to minimize fraudulent activities in the organization. However, it is also critical to observe that these rules may apply in certain instances when the prospects of prosecution are not either forthcoming or possible. For instance, the rules and regulations have set principles that coincide with the stipulations of the organization in the context of the mitigating measures. On that account, the preventive strategies ensure that the principles of GAAP are implemented to act as a deterrent (Bragg, 2008). Additionally, the GAAP rules ensure that managers and corporate heads have certain yardsticks of assessing the integrity, transparency and accountability of its workers especially in the financial transactions. Alternatively, there are also glaring setbacks that would not help in the minimization of fraudulent machinations of workers in the organization. For example, there should be legal department that assists in the pressing of charges against suspected workers in financial fraud. This is only possible when the GAAP rules are used in accordance with a stipulated law. Moreover, there should also be awareness of the rules and regulations within the organization in terms of orientation that helps workers to understand the ethics and morals of the company. In other words, workers should be inculcated with certain morals that ensure that they abide with the rules and regulations of the company they are serving to avoid conflicts. There should also be room for dialogue and efficient feedback that from both workers and managers in companies to encourage transparency and dialogue (Harrer, 2008). Therefore, this has the merit of revealing the financial transactions taking place in the organization and guarding against instances of fraud that may arise. This is through making reports either publicly or secretly to the necessary authorities within the management. There are several consequences of the fraudulent activities to the organization both in terms of revenue loss and subsequent drop in transparency and accountability. For example, the leasing of technology assets with inflated prices will lead to an imbalance of the finances of production. In the same context, the inflation of prices leads to corruption and abuse of office because of improper use of the company’s funds (Tarantino, 2010). On the other hand, the understatement of e-commerce state tax payments also undermines the stipulations of the government in terms of abiding with its tax provision. Therefore, if there is an understatement of tax payments, it means the company is predisposed to legal problems with the government. In return, the government has the jurisdiction to constitute legal charges against the organization that has grave ramifications such as freezing of its assets. The government may also make sanctions and embargoes on its goods and products that are essential in the well being of the company. There is also the receivership of post-employment benefits by workers while using fictitious accounts that has grave consequences on the production of the organization. For example, there will be an interference with the company’s budget in terms of payments to the wrong people (Hightower, 2008). In the same view, there will be lack of accountability in terms of production and sales including the inclusion of profits in the organization. This has the possibility of involving the government that may institute legal charges and tarnish the integrity of the firm. Additionally, there is also the hiding of cash to prevent the expectations of analysts in future quarters that has different repercussions for the organization. This will lead to incorrect reports during the compilation of auditing reports and assessment of average turnover. Furthermore, there is also the issue of transparency and accountability for the organization that is subjected if there is revelation of the deed. This may send potential, clients and sponsors away because of the bad reputation of the company. Alternatively, there is also the possibility of jail term and freezing of assets in case of concealment of inventory to boost the ratings of the organization (Harrer, 2008). In this scenario, the government may arrest the perpetrators and lead to a fall in production because of the shortage of workers. This suggests that a company may face criminal charges for makings attempts to interfere with a uniform competition in the market. Therefore, in making recommendations, I would suggest that managers in IT departments to oversee all leases on behalf of the organization. This has the caution of ensuring someone is responsible when there are cases of discrepancies in the organization. It is also important to make documentation for future evaluations on leases and transactions conducted to ensure there are cases of inflated prices. On the other hand, in terms of understatement of e-commerce state tax payments, the tax department of the government should guard against such an action. This is through the insistence on the use of electronic tax registers to monitor all tax payments made with clients and customers (Tarantino, 2010). Additionally, it is also essential for the management punish workers caught engaging in such as acts of understatement of tax payments to serve as lesson for other workers. In the same perspective, for employees who pay themselves through anonymous accounts, it is critical for the management to set stringiest laws that ensure they serve longer jail terms. This would be accompanied by immediate dismissal from the company including a hefty fine that commiserates with the amount illegally earned in post-employment benefits. In other words, workers should give enough caution on the prospects of their careers if caught in such as acts of fraud. However, in case of hiding cash to help in future quarters where earnings do not meet the expectations of an analyst, the government and the management can do a few things. For example, they can set a trap and arrest the worker involved in order to prevent a similar case in future. There management may suspend such a worker without pay while awaiting criminal charges from the company’s board (Bragg, 2008). The government may set mechanisms of luring the criminal to his act then recovering the hidden cash back to the company. Alternatively, the recommendation would also be similar for workers caught concealing inventory shrinkage because it seems low for the industry. They will face charges of fraud related charges such as attempts to tilt the market forces without facing the proper channels. Additionally, the management will ensure that the worker is dismissed from company accompanied with a hefty fine. However, in terms of internal controls, there are certain actions the company should take to avoid the fraud cases. For example, the appropriate internal control for the inflation of leases on technology includes improving on the management information systems (Hightower, 2008). This would ensure workers have proper channels of communication to report on their corrupt colleagues. Additionally, for the understatement of tax payments, there the management may ratify its goals and objectives that guard against involvement in graft and abuse of offices. Alternatively, there should also be improvement on work and authority to facilitate the gap between the management and workers in terms of critical decisions. Furthermore, there is also the case of self-payment of post-employment benefits through fictitious accounts that may requirement the implementation of systems that guard against such as actions. This suggests that the organization has the mandate to employ its technological resources to monitor, direct and assess the movement of its funds in the wrong hands. However, for hiding cash to confuse the expectations of the analyst, the most appropriate internal control is to implement the available resources to evaluate the repercussions of such actions (Bragg, 2008). In the same view, the concealment of inventory shrinkage for the benefit of the organization would require the use of management information systems (MIS) to prevent the loss of sensitive schemes. The organization also has express jurisdiction to encourage and a work policy that guard against making critical decisions without prior consultation with the management. In that view, companies should inculcate various measures of mitigating fraud activities and the subsequent loss of potential of clients and sponsors (Hightower, 2008). For example, they should involve the government, legally accepted accounting firms such as GAAP and its internal controls. Additionally, there should also the direct involvement of workers in the affairs of the company through forwarding of complaints and giving positive feedbacks that help in the prevention of graft cases such as ones discussed above. Consultation of workers and the management should be encouraged though dialogue and open communication of problems that affect the firm in order to find amicable solutions. There should also be prompt prosecution of those found involved in fraudulent activities through public trials that teach other workers a lesson. This has consequential control against the increase of white collar crimes that are affecting companies in different ways (Bragg, 2008). In the same context, this will curb on the prevalent losses that affect firms because of fraud activities. However, there should not be victimization on the job based on fraud suspicions especially where there is internal fighting in the company. In other words, this has the effect of resulting to a decline of production and motivation of workers. References Bragg, S. (2008). Wiley GAAP Policies and Procedures. New York, NY: John Wiley & Sons. Epstein, B. & Saafir, N. (2010). Wiley GAAP: Practical Implementation Guide and Workbook. New York, NY: John Wiley & Sons. Harrer, J. (2008). Internal Control Strategies: A Mid to Small Business Guide. New York, NY: John Wiley & Sons. Hightower, R. (2008). Internal Controls Policies and Procedures. New York, NY: John Wiley & Sons. Tarantino, A. (2010). Financial Internal Controls Best Practices. New York, NY: John Wiley & Sons. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Research Project Paper Example | Topics and Well Written Essays - 2000 words”, n.d.)
Research Project Paper Example | Topics and Well Written Essays - 2000 words. Retrieved from https://studentshare.org/finance-accounting/1462760-research-project
(Research Project Paper Example | Topics and Well Written Essays - 2000 Words)
Research Project Paper Example | Topics and Well Written Essays - 2000 Words. https://studentshare.org/finance-accounting/1462760-research-project.
“Research Project Paper Example | Topics and Well Written Essays - 2000 Words”, n.d. https://studentshare.org/finance-accounting/1462760-research-project.
  • Cited: 0 times

CHECK THESE SAMPLES OF Generally Accepted Accounting Principles

Generally Accepted Accounting Principles Paper

Running Heading: Generally Accepted Accounting Principles Paper Generally Accepted Accounting Principles Paper Customer Name University Name Introduction In today's world, accounting for health care has become increasingly important.... Generally Accepted Accounting Principles, related to health care, are those principles that serve as guidelines for accounting finances of health care institutions.... In this paper a discussion will be made on these five Generally Accepted Accounting Principles related to health care....
4 Pages (1000 words) Research Paper

Generally Accepted Accounting Principles Paper

Generally Accepted Accounting Principles Paper Subject: Professor: December 10, 2012 Generally Accepted Accounting Principles entail rules or policy compliance.... The research delves on describing United States Generally Accepted Accounting Principles.... The research delves on the reasons for the strict implementation of the United States Generally Accepted Accounting Principles.... United States Generally Accepted Accounting Principles implementation enhances the financial statement users' decisions....
4 Pages (1000 words) Essay

Generally accepted accounting principles relating to health care

Generally Accepted Accounting Principles Relating to Health Care The Concept of GAAP Generally Accepted Accounting Principles (GAAP) are fundamentally regarded as a standard framework and guiding principles of financial reporting, as well as accounting process.... Oversight of Use of GAAP The different standards or the accounting principles belonging to GAAP can be considered as the set of guiding principles that provide effectual accounting solutions for any organization while preparing financial statements....
3 Pages (750 words) Essay

Application of Generally Accepted Accounting Principles

This research paper " Application of Generally Accepted Accounting Principles" highlights the role of the Emerging Issues Task Force that was tasked with assisting the FASB in improving financial reporting through timely identification and resolution of financial accounting issues.... The Financial Accounting Standards Board is a non-profit and private organization that was formed in 1973 and whose sole purpose was to develop Generally Accepted Accounting Principles in the US....
6 Pages (1500 words) Research Paper

Accounting for Managers: Generally Accepted Accounting Principles

This research paper "Accounting for Managers: Generally Accepted Accounting Principles" explores various types of accounting—financial, managerial, cost, public, internal auditing, governmental or not-for-profit accounting (fund accounting), tax, and international.... These financial statements are to be prepared using a predefined set of standards and guidelines, widely known as the Generally Accepted Accounting Principles (GAAP) (Types of Accounting, 2013)....
6 Pages (1500 words) Research Paper

The United States Generally Accepted Accounting Principles

The paper 'The United States Generally Accepted Accounting Principles ' presents the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), through a Memorandum of Understanding (MOU), which declared their commitment.... Currently, the standards for intangible assets are found in US GAAP's Financial accounting Standards (FAS) 141, Business Combination, and FAS 142, Goodwill and Other Intangible Assets, and in the IASB's International accounting Standards (IAS) 38, Intangible Assets, and IFRS 3, Business Combinations....
2 Pages (500 words) Essay

Generally Accepted Accounting Principles for Cost Accounting

This paper "Generally Accepted Accounting Principles for Cost Accounting" discusses the Generally Accepted Accounting Principles that are related to the cost accounting and on what rules are these principles-based.... It is recognized by the accounting industry and the government alike for being the source of Generally Accepted Accounting Principles (GAAP) for the local and federal government.... The cost and management accounting principles must become an integral part of the management organism....
6 Pages (1500 words) Case Study

Corporate Accounting and Generally Accepted Accounting Principles

The paper "Corporate Accounting and Generally Accepted Accounting Principles" is a wonderful example of an assignment on finance and accounting.... The awareness and knowledge about Generally Accepted Accounting Principles (GAAP) are considered or deemed very essential for business practitioners who aim at issuing stock or participating in mergers and acquisitions in the future of their business.... The paper "Corporate Accounting and Generally Accepted Accounting Principles" is a wonderful example of an assignment on finance and accounting....
6 Pages (1500 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us