Question

In your accounting career you will be required to analyse current accounting issues and communicate your theoretical understanding to your professional colleagues and your clients. For this assignment assume that you are the senior accountant working for a major firm.

Question 1 - 9 marks (1,500 words) The CEO has forwarded to you an interesting article and requires you to provide her with a deeper theoretical understanding of the issues discussed so that she can fully engage in the lively discourse at an upcoming conference. You are required to find a newspaper article or web page report of an item of accounting news, i.e. it refers to a current event, consideration, comment or decision that has been published after the 1st of January 2018. Your article could also come from one of the professional journals. The article should not come from an academic journal. Academic journals generally do not contain news articles or articles of less than one page and are usually only published 2 or 4 times a year. If you are having a problem ensuring that your article is from an appropriate source contact your subject coordinator. You then need to explain the article that you have found in your own words and clearly relate the concepts, ideas and facts within the article to one or more of the theories or topics that you have studied this session. Support your analysis of the assumptions and implications of the topic or theory as appropriate with reference to sources in APA 6 style. For example, this article from the Sydney Morning Herald in April 2016 could be linked to the topics of accounting regulation and measurement (and perhaps others). You must provide a copy of the article or web page, with details of the source, date and page number with your answer.

Question 2 - 10 marks (1,500 words) The Senior Partner of the firm you work for has appointed you to a new role. It is now your responsibility to review upcoming accounting standards and provide a report to the partners on the proposed standard and the opinions of other industry players on the changes. Firstly, you are required to find a current exposure draft or proposal for a new accounting standard which has been opened for public comments. (These can be found on the websites of most standard-setting organisations, such as the IASB, AASB and FASB. Hint: These websites can be quite difficult to navigate, so as a first step try typing “IASB exposure draft and comment letters”/”FASB exposure draft and comment letters” into Google or other search engine of your choice). Read a sample of the comments from a range of respondents. Select four respondents, ideally from different types of organisations for example, from accounting bodies, industry, companies or corporate bodies. If you are having a problem finding suitable comments letters then contact your subject coordinator. In your own words, supporting your evaluation with appropriate citations, appropriately referenced in APA 6 style, you are required to include the following information in the report. An outline of what the exposure draft is introducing or changing. An assessment as to whether the exposure draft is being introduced in the ‘public interest’. An outline of the views presented in the comments letters which highlights the areas of agreement and disagreement with the exposure draft and/or other comments letters. An assessment (with relevant examples) as to whether the comments letters utilise any of the arguments 'for' or 'against' regulation. An application of each of the theories of regulation (public interest, private interest and capture) to the comments letters and a justification as to which theory(ies) is most effective at explaining the comments and which theory(ies) is least effective at explaining the comments. Please note: you need to attach the comment letters you selected for your report (there is no need to attach the exposure draft)

Answer 1

U.S. Accuses Accountants of Trying to Game Reviews of KPMG AuditsU.S. Accuses Accountants of Trying to Game Reviews of KPMG Audits

Five former employees of KPMG and a former employee of the Public Company Accounting Oversight Board were charged with plotting to use confidential information before the board’s review of the company’s auditing work.CreditSam Mircovich/Reuters

By Matthew Goldstein

Jan. 22, 2018

Five former employees of KPMG and a former government accountant have been charged by federal prosecutors with taking part in a plot to help the big accounting firm get a leg up in a regulatory review of its auditing work.

Federal prosecutors in New York said Monday that they had charged the group with trying to get confidential information about the review process from the Public Company Accounting Oversight Board, a government body that examines the auditing work of accounting firms.

In April, KPMG said it had fired six employees after learning of efforts to improve the firm’s score on examinations by the oversight board.

Prosecutors charged the former employees with conspiring to acquire confidential information about the board’s review process, including the timing of examinations and other issues, in order to improve KPMG’s overall scores.

The Securities and Exchange Commission, in a related civil enforcement action, compared the actions of the former KPMG accountants to “literally stealing the exam” to influence the outcome of the oversight reviews.

The S.E.C.’s lawsuit cites a text message from one of the defendants in which he describes having sent a “grocery list” of KPMG audits to be reviewed by the oversight board.

Federal prosecutors announced that one of the former KPMG employees, Brian Sweet, pleaded guilty on Jan. 5 to a conspiracy and wire fraud charge. Mr. Sweet is cooperating with the authorities, they said.

KPMG said in a statement that it promptly notified the authorities in early 2017 after discovering what its former employees had done. The firm added that it had since “taken remedial actions to assure that such conduct cannot happen again.”

Mr. Sweet, according to court filings, left the oversight board in 2015 for a job with KPMG. At the time, he took with him confidential information about the board’s planned review of audits conducted by KPMG. Mr. Sweet subsequently obtained additional confidential information from the board and shared it with other employees at KPMG, the authorities said.

Four of the former KPMG employees were indicted by a federal grand jury on conspiracy and wire fraud charges. They are David Middendorf, Thomas Whittle, David Britt and Cynthia Holder.

Jeffrey Wada, who worked at the government accounting board, also was indicted.

Aside from Mr. Sweet, none of the accused have entered pleas. Richard Morvillo, the attorney for Mr. Sweet, said his client’s guilty plea was “taking a first step” toward addressing his mistakes.

Lawyers for the other people charged either could not be reached for comment or said their clients intended to contest the charges.

The authorities contend that after Mr. Sweet joined KPMG, he got confidential information from Ms. Holder, who at the time worked at the oversight board. After Ms. Holder joined KPMG, she then got confidential information from Mr. Wada, the authorities said.

Mr. Wada, they said, passed on confidential information to Ms. Holder at the same time he was trying to land a job at KPMG. The passage of confidential information had continued until early last year.

View

This is a serious problem.such type of behaviour cause serious disruptions in the industry.it could have been stopped if KPMG would not have hired employees of the client organisation.It is necessary for the organisation to have a properly planned structure where no employees would have unreasonable access to sensitive informations.It could have been stopped if there was proper reviews of organisation accounting system and their employees.

question 2

Dear Mr Hoogervorst
Exposure draft 2017/4 Property, Plant and Equipment – Proceeds before Intended Use (Proposed amendments to IAS 16)
Deloitte Touche Tohmatsu Limited is pleased to respond to the International Accounting Standards Board’s (‘the IASB’s’) exposure draft Property, Plant and Equipment – Proceeds before Intended Use (Proposed amendments to IAS 16) (‘the exposure draft’).
We do not agree with the proposed amendment to IAS 16 and share many of the concerns expressed in the Alternative View on the exposure draft. As stated in our response to the IFRS Interpretations Committee’s tentative agenda decision on this issue in July 2014, we do not believe that the recognition of revenue with no depreciation and little or no other associated cost would be an appropriate outcome and, consistent with Mr Zhang, we do not believe that consumption of property, plant and equipment in development can be assumed to be ‘negligible’.  
The proposed amendment is likely to have an effect primarily on entities operating in the energy and extractives industries, where construction of an asset can be a lengthy and complex process with many costs (including those of testing) attributable to bringing the asset to the condition necessary for it to be capable of operating in the manner intended by management. Proceeds from, for example, power generated during the commissioning of a new power station, precious metals produced prior to completion of a processing plant or minerals extracting during construction of an underground shaft for a mining operation can be significant and can arise over an extended period of time.  
We recommend that a thorough consideration of the issues arising from such activities (for example, the unit of account for property, plant and equipment relating to a large mining development and the point at which such an asset is determined to be available for use) and similar issues arising in other industries is necessary prior to making amendments to specific IFRSs as a very limited scope amendment such as the one proposed in the exposure draft cannot address those issues and carries the risk of unintended consequences.  

Yours sincerely