ACCT 101: Control systems


Session 4


Dr. Richard M. Crowley

http://rmc.link/

Front matter

Homework 1 review

  • Closing entries
    • Accounts are: Revenues, Expenses, Gains, Losses, Dividends
  • Depreciation
    • (Price paid - salvage value) / [life length from purchase]
    • In homework: (100,000 - 20,000) / 5 = 16,000
  • Accrual entries:
    1. Bring an expense or revenue forward
    2. Create a payable or receivable as well
    3. Payable or receivable reversed upon payment

Quiz details

  • Like the practice quizzes on eLearn, except 60 minutes long
  • What can be covered:
    • Everything in the session 1 to 4 slides

Not on the quiz

  • Par value accounting
  • Concept names and definitions
    • Matching principle, periodicity, etc.

Potentially on the final

  • Par value accounting for equity

The quiz is to makes sure you have the fundamentals down

Quiz resources

  • Practices provided on eLearn:
    • A full practice Quiz 1
    • A set of extra Quiz 1 practice questions
    • Select textbook problems (with answers)
  • There is an account glossary on eLearn
    • Lists and defines every account we’ve seen so far

Learning objectives

Diagram

Control Systems (Chapter 4)

  1. Understand the drivers of fraud
  2. Be able to identify weaknesses in firms’ systems and suggest improvements
  3. Be able to reconcile book and bank cash

A/R (Chapter 5)

  1. Understand how to write off uncollectible A/R

Fraud

Misreporting: A simple definition

Errors that affect firms’ accounting statements or disclosures which were done seemingly intentionally by management or other employees at the firm.

Traditional accounting fraud

  1. A company is underperforming
  2. Management cooks up some scheme to increase earnings
    • Wells Fargo (2011-2018?)
      • Fake/duplicate customers and transactions
  3. Create accounting statements using the fake information

Other accounting fraud types

  • Dell (2002-2007)
    • Cookie jar reserve (secret payments by Intel of up to 76% of quarterly income)
      1. The company is overperforming
      2. “Save up” excess performance for a rainy day
      3. Recognize revenue/earnings when needed to hit future targets
  • Apple (2001)
    • Options backdating
  • China North East Petroleum Holdings Limited
    • Related party transactions (transferring 59M USD from the firm to family members over 176 transactions)