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Environmental and economic issues are addressed together within the framework of environmental accounting but represent only two pillars of sustainable development. The concept of sustainable development is equivalent to the concept of well-being, which requires the recognition that humankind must coexist within the limits of available resources and determinants of its potential. Sustainable development is defined as encompassing three main pillars of economic, environmental and social. For example employment, culture and civilization, in a manner that directs the needs of present and future human beings and without guaranteeing the viability of natural land systems on which we depend on growth and life.

Financial Accounting / Environmental accounting
« on: March 30, 2019, 01:53:44 PM »
Environmental accounting is a subset of accounting proper, its target being to incorporate both economic and environmental information. It can be conducted at the corporate level or at the level of a national economy through the System of Integrated Environmental and Economic Accounting, a satellite system to the National Accounts of Countries[1] (among other things, the National Accounts produce the estimates of Gross Domestic Product otherwise known as GDP).

Environmental accounting is a field that identifies resource use, measures and communicates costs of a company’s or national economic impact on the environment. Costs include costs to clean up or remediate contaminated sites, environmental fines, penalties and taxes, purchase of pollution prevention technologies and waste management costs.

An environmental accounting system consists of environmentally differentiated conventional accounting and ecological accounting. Environmentally differentiated accounting measures effects of the natural environment on a company in monetary terms. Ecological accounting measures the influence a company has on the environment, but in physical measurements.

« on: March 30, 2019, 01:49:14 PM »
 the focus in the debate between whether accounting standards should be principles or rules. Management
discretion is allowed with accounting principles, but would not be allowed with rules. The rules would be like laws.
Major financial frauds were committed as follows: McKesson and Robbins created fictitious sates and
inventories. Great Salad Oil Swindle used the fact that oil and water do not mix to fraudulently over-state the quantity of
oil in inventory tanks. The bottom part of the inventory tank was water and the top was salad oil. The auditors did not
test all the way to the bottom of the tanks. Equity Funding was about fake insurance policies. Cedant Corporation was
about fake revenues. Zzzz Best was a pyramid scheme. Sunbeam Corporation used what is called channel stuffing where
revenue recognition is accelerated inappropriately. Nortel used what is called a big bath. Nortel had deferred recognition
of expenses by recording as assets. This inflated total assets and total owners’ equity. After several years, they wrote off
the assets and recognized a huge loss that drove the owners’ equity down. It washed away the profits.
Worldcom also recorded assets when they should have recognized expenses. Enron is well known for using
Special Purpose Entities to hide huge losses. Enron creatively and fraudulently recorded non-existent revenues. Qwest
and Global Crossing used what are called swap sales to inflate reported income.

Financial Accounting / FRAUD INDICATORS
« on: March 30, 2019, 01:48:51 PM »
After many dramatic fraud cases were identified, a list of red flags associated with these examples of fraud
were developed. Had these red flags been noticed, then the organization’s management or employees might not have
committed fraud or it might have been caught sooner. The red flags include the following: Lack of independence
between the organization’s management, external auditors, audit committees and internal auditors; Lack of competence,
oversight or diligence in or by the organization’s audit committee and internal auditors; Weak internal control processes;
Management style that pressured employees to take actions beyond financial statement management to manipulation to
outright misrepresentation which is fraud.
Personnel-related practices allowing financial statement misrepresentation include low employee morale that is
possibly due to inadequate compensation, high turnover and inexperienced managers. This tends to result when there is
inadequate screening of potential employees and managers. Accounting practices indicating that someone has committed
fraud include frequent external auditor firm changes, restatements of prior year reports due in part to large and frequent
accounting errors.
An organization that loses financial records may have lost their financial records on purpose to hide fraud.
Fraud is easier to commit when there is no strong accounting information system. Company’s financial conditions that
can indicate possible fraud include insider trading and inventory manipulation as has already been presented.

Financial Accounting / CORPORATE GOVERNANCE
« on: March 30, 2019, 01:48:34 PM »

Corporate governance can mitigate financial statement fraud through the process of greater supervision of the
organization. This process is also called oversight. Oversight is so important that it is included in the title of the
organization that replaced the American Institute of Certified Public Accountants regarding the development of auditing
standards. This organization is the Public Company Accounting Oversight Board (PCAOB).
The Sarbanes Oxley Act was the legislation that mandated the establishment of the Public Company
Accounting Oversight Board. Some of the standards promulgated by the Public Company Accounting Oversight Board
include the following: Every five years, the primary or reviewing audit partner must be changed for each client. Working
papers must be maintained for a minimum of seven years. This is partially due to documents being shredded relative
to a number of famous fraud cases. A few of these famous fraud cases will be briefly presented later in this lesson.
The internal control system of an audited organization must be evaluated and any material weaknesses
Formal and official ethics standards must be adopted by each auditing organization. Major components of
these ethics standards must include clarity about the organization’s independence from the audited organization
along with how the audit process is accepted and planned and supervised.
Other oversight groups that do not actively operate the organization include the organization’s Board of
Directors, Audit Committee and external auditors. Increased oversight is expected by the organization’s internal
auditors as supervised by top managers such as the Chief Executive Officer and the Chief Financial Officer. It is
hoped and believed that if an organization has a strong audit committee and excellent external audit process that
fraud will be deterred. However the responsibility and blame for fraud rests exclusively at the feet of management
and not at the feet of the audit committee or the external auditors.

« on: March 30, 2019, 01:48:09 PM »
Financial statement fraud that harms individual investors, financial markets, and society includes the loss of
retirement funds, employment, community economics and economies. Fraudulent practice of insider trading is an
example. Insiders are corporate managers. Trading refers to buying or selling of the corporation’s common and preferred
stock. Usually the stock that is purchased is authorized, but not yet issued stock.
When the manager buys the stock, it is purchased directly from the corporation and not from current stock
holders. The new stock dilutes the value of the existing outstanding stock. Before the existing stockholders learn of the
new issuance of stock, the managers have sold the new stock at the existing market value that does not reflect the actual
decline due to dilution caused by the increase in the number of shares representing an unchanged corporate total value.
Insiders or managers know about both good and bad news for the corporation before the impact of the news is
reflected in the financial statements. Managers use this news to buy or sell stock for their personal economic advantage.
In the year 2006, the Securities and Exchange Commission addressed the reporting of stock option exercising. The time
frame has been shortened.
Stock options are given as both an incentive and a reward to managers. The option is an opportunity to
purchase common or preferred stock at a certain price. The option is an opportunity to purchase common or preferred
stock at a certain price. Managers would wait for the stock price to rise and then pretend to purchase the stock days or
even weeks earlier when the stock price was lower. Since the stock was purchased directly from the corporation and was
part of the authorized but unissued stock, it was relatively easy for the corporation to record an earlier date than the actual
transaction occurred.
Recording an earlier date than the actual transaction occurred is called back dating. The purchase would be
back dated and the managers would immediately sell the stock for personal profit. Existing stockholders experienced
personal loss. Sometimes this was a dramatic loss for the existing stockholders and thereby the organization.

« on: March 30, 2019, 01:45:46 PM »
Financial statement fraud is intentionally violating the Financial Accounting Standards Board’s Concept
Statement number one that states that financial statements are to provide information that is useful to decision makers.
Misrepresentations are not useful. Intentional misrepresentation constitutes fraud.
Legal recourse is available when the decision maker relies on the misrepresented information and injury results.
The injury is typically financial. Without intentional misrepresentation it is not fraud. For example, someone could make
decisions using financial statements that do not contain intentional misrepresentations and the decision results in loss
when profit was the goal. This is poor decision making and not fraud.

his paper begins by defining forensic accounting and describing differences between it and traditional
accounting and auditing. The paper then explains the role of forensic accountants. This includes
identifying knowledge and skills forensic accountants are expected to possess. Forensic accountants’
opportunities are described along with the organizations that support their work.
Forensic accountants are viewed as a combination of an auditor and private investigator. Knowledge and
skills include the following: investigation skills, research, law, quantitative methods, finance, auditing, accounting
and law enforcement officer insights. Investigation skills will be covered later in the paper. Organizational behavior
and applied psychology knowledge and skills are essential.
Forensic accountants have been employed by the Federal Bureau of Investigation (FBI), Central
Intelligence Agency (CIA), Internal Revenue Service (IRS), Federal Trade Commission (FTC), Homeland Security,
Bureau of Alcohol, Tobacco and Firearms, Governmental Accountability Office (GAO) and other government
agencies. The focus is on what is referred to as white collar crime. This is why financial and other skills are
Outside of government employment, big employers of forensic accountants include financial intermediaries
such as banks and insurance organizations plus divorce attorneys. Forensic accountants often testify in civil and
criminal court hearings. In this capacity, they are serving as expert witnesses. They do not testify as to whether fraud
has occurred. This is the court’s decision. The expert witness presents evidence. Forensic accountants have a
number of organizations that support their work.
Here is the list of key organizations that support forensic accountants work along with the URL to access
them: Association of Certified Fraud Examiners (; American College of Forensic Examiners
(; Association of Certified Fraud Specialists (; National Litigation Support
Services Association (; National Association of Certified Valuation Analysts (;
American Institute of Certified Public Accountants (; and The Institute of Business Appraisers
( .

Financial Accounting / Forensic accounting
« on: March 30, 2019, 01:41:02 PM »
Forensic accounting, forensic accountancy or financial forensics is the specialty practice area of accounting that describes engagements that result from actual or anticipated disputes or litigation. "Forensic" means "suitable for use in a court of law", and it is to that standard and potential outcome that forensic accountants generally have to work. Forensic accountants, also referred to as forensic auditors or investigative auditors, often have to give expert evidence at the eventual trial.[1] All of the larger accounting firms, as well as many medium-sized and boutique firms and various police and government agencies have specialist forensic accounting departments. Within these groups, there may be further sub-specializations: some forensic accountants may, for example, just specialize in insurance claims, personal injury claims, fraud, anti-money-laundering, construction,[2] or royalty audits.[3]

Forensic accounting is defined as "the application of investigative and analytical skills for the purpose of resolving financial issues in a manner that meets standards required by courts of law. Forensic accountants apply special skills in accounting, auditing, finance, quantitative methods, certain areas of the law, research and investigative skills to collect, analyze and evaluate evidential matter and to interpret and communicate findings."[4]

Financial forensic engagements may fall into several categories. For example:

Economic damages calculations, whether suffered through tort or breach of contract;
Post-acquisition disputes such as earnouts or breaches of warranties;
Bankruptcy, insolvency, and reorganization;
Securities fraud;
Tax fraud;
Money laundering;
Business valuation; and
Computer forensics/e-discovery.
Forensic accountants often assist in professional negligence claims where they are assessing and commenting on the work of other professionals. Forensic accountants are also engaged in marital and family law of analyzing lifestyle for spousal support purposes, determining income available for child support and equitable distribution.

Engagements relating to criminal matters typically arise in the aftermath of fraud. They frequently involve the assessment of accounting systems and accounts presentation—in essence assessing if the numbers reflect reality.

Some forensic accountants specialize in forensic analytics which is the procurement and analysis of electronic data to reconstruct, detect, or otherwise support a claim of financial fraud. The main steps in forensic analytics are (a) data collection, (b) data preparation, (c) data analysis, and (d) reporting. For example, forensic analytics may be used to review an employee's purchasing card activity to assess whether any of the purchases were diverted or divertible for personal use.[5]

Financial Accounting / What is FOB is Shipping Point?
« on: March 29, 2019, 01:56:35 AM »

FOB is a shipping term that stands for “free on board.” If a shipment is designated FOB (the seller’s location), then as soon as the shipment of goods leaves the seller’s warehouse, the seller records the sale as complete. The buyer owns the products en route to its warehouse and must pay any delivery charges.

That also means that if a pallet of jewelry is lost or damaged in shipment, the buyer must file any claims for reimbursement – not the seller – since the shipment became the buyer’s responsibility immediately.

Financial Accounting / FOB destination
« on: March 29, 2019, 01:56:02 AM »
FOB destination is a contraction of the term "Free on Board Destination." The term means that the buyer takes delivery of goods being shipped to it by a supplier once the goods arrive at the buyer's receiving dock. There are four variations on FOB destination terms, which are:

FOB destination, freight prepaid and allowed. The seller pays and bears the freight charges and owns the goods while they are in transit. Title passes at the buyer's location.

FOB destination, freight prepaid and added. The seller pays the freight charges but bills them to the customer. The seller owns the goods while they are in transit. Title passes at the buyer's location.

FOB destination, freight collect. The buyer pays the freight charges at time of receipt, though the supplier still owns the goods while they are in transit.

FOB destination, freight collect and allowed. The buyer pays for the freight costs, but deducts the cost from the supplier's invoice. The seller still owns the goods while they are in transit.

Thus, the key elements of all the variations on FOB destination are the physical location during transit at which title changes and who pays for the freight. If a buyer's transportation department is proactive, it may avoid FOB destination terms, instead favoring FOB shipping point terms so that it can better control the logistics process.

Any type of FOB terms may be superseded if a customer elects to override those terms with customer-arranged pickup, where a customer arranges to have goods picked up at the seller's location, and takes responsibility for the goods at that point. In this situation, the billing staff must be aware of the new delivery terms, so that it does not bill freight to the customer.

Since the buyer takes ownership of the goods at its own receiving dock, that is also where the seller should record a sale.

The buyer should record an increase in its inventory at the same point (since the buyer is undertaking the risks and rewards of ownership, which occurs at the point of arrival at its shipping dock). Also, under FOB destination terms, the seller is responsible for the cost of shipping the product.

If the goods are damaged in transit, the seller should file a claim with the insurance carrier, since the seller has title to the goods during the period when the goods were damaged.

In reality, the shipper will probably record a sale as soon as merchandise leaves its shipping dock, irrespective of the terms of delivery. Thus, the real impact of FOB destination terms is the determination of who pays for the freight expense.

Financial Accounting / What are Closing Entries?
« on: March 29, 2019, 01:54:23 AM »
Closing entries, also called closing journal entries, are entries made at the end of an accounting period to zero out all temporary accounts and transfer their balances to permanent accounts. In other words, the temporary accounts are closed or reset at the end of the year. This is commonly referred to as closing the books.

Temporary accounts are income statement accounts that are used to track accounting activity during an accounting period. For example, the revenues account records the amount of revenues earned during an accounting period—not during the life of the company. We don’t want the 2015 revenue account to show 2014 revenue numbers.

Permanent accounts are balance sheet accounts that track the activities that last longer than an accounting period. For example, a vehicle account is a fixed asset account that is recorded on the balance. The vehicle will provide benefits for the company in future years, so it is considered a permanent account.

At the end of the year, all the temporary accounts must be closed or reset, so the beginning of the following year will have a clean balance to start with. In other words, revenue, expense, and withdrawal accounts always have a zero balance at the start of the year because they are always closed at the end of the previous year. This concept is consistent with the matching principle.

Financial Accounting / Why are Reversal Entries Used?
« on: March 29, 2019, 01:53:28 AM »

Reversing entries are usually made to simplify bookkeeping in the new year. For example, if an accrued expense was recorded in the previous year, the bookkeeper or accountant can reverse this entry and account for the expense in the new year when it is paid. The reversing entry erases the prior year’s accrual and the bookkeeper doesn’t have to worry about it.

If the bookkeeper doesn’t reverse this accrual enter, he must remember the amount of expense that was previously recorded in the prior year’s adjusting entry and only account for the new portion of the expenses incurred. He can’t record the entire expense when it is paid because some of it was already recorded. He would be double counting the expense.

Financial Accounting / What is a Reversing Entry?
« on: March 29, 2019, 01:52:57 AM »
Reversing entries, or reversing journal entries, are journal entries made at the beginning of an accounting period to reverse or cancel out adjusting journal entries made at the end of the previous accounting period. This is the last step in the accounting cycle.

Reversing entries are made because previous year accruals and prepayments will be paid off or used during the new year and no longer need to be recorded as liabilities and assets. These entries are optional depending on whether or not there are adjusting journal entries that need to be reversed.

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