Comprehensive Master of Accountancy

Spring 2001

1.Research Methods Empirical research methods can be loosely divided into surveys, laboratory experiments, and quasi-experiments. Consider the topic of stock based employee compensation: Does APB Opinion 25 (intrinsic value method) with disclosures of fair value meet the needs of financial statement users as well as actual recognition of fair value under FASB’s Statement No. 123 (fair value method)?

a.Using each methodology, how would you design a study to seek an answer to the question? How would you gather the data? Compare and contrast the strengths and weaknesses of each methodology.

b.Discuss how each methodology might be useful in the standard setting process. What types of research would be the most useful to standard setters or regulators? (You may also discuss analytical research in addition to empirical research.)

2.Auditing The auditing profession currently operates in a dynamic and rapidly changing environment. Your challenge as a professional just entering the accounting profession is to recognize and cope with these changes.

a.Carefully describe and rank three merging issues or changes that you think are the most important to the future of the profession.

b.Discuss and justify your choice of these three issues.

c.Identify threats if we don’t successfully manage the issues/changes and opportunities that they provide.

d.What strategy might you develop to help you, and other professionals like you, to recognize the great changes and issues of the future.

3 .Information Systems Answer 2 of the following three questions

a.Implementing an ERP System Your organization is planning to implement an ERP system. Some managers in the organization favor the “big bang” approach. Others advocate a “phased-in” approach. The CEO has asked you, as project leader, to summarize the advantages and disadvantages of each approach and to make a recommendation.

The organization is traditional – with a strong internal hierarchy. The company was acquired in a merger two years ago and the ERP project is an effort on the part of the parent company to standardize business processes and reporting across the organization. Prior to this, the organization had been using a general ledger package that it acquired in 1985. Most of the transaction processing is a combination of batch and manual processing. Most employees think that the legacy system works well. At this point, the implementation project is behind schedule.

3b. Distributed Data Processing In the last two decades, there has been a transition from a centralized mainframe computer environment to a distributed network where an organization has the ability to share computer processing. One of the fastest-growing segments of the computer industry is the local area network, which is said to be the wave of the future. LAN’s permit the transfer of information between microcomputers, word processors, data storage devices, printers, and voice and telecommunication devices. Current opinions hold that the flow of organizational communication has been enhanced by the transition from the optimization of computers experienced in the traditional distributed network to the optimization of human resources in the LAN environment.

1.Describe the reasons why an organization would choose a distributed network over the traditional centralized computer environment.

2.Compare and contrast the characteristics of a traditional distributed computer network with those of a local area network as they are related to the:

(a)utilization of computer hardware

(b)user interaction and sharing of electronic information.

3c.Risk Assessment/Analysis For each of the following risk categories, discuss the types of risk events that can occur and how they can be controlled.

  1. subversive threats
  2. equipment failures

4.Accounting Theory and Practice. The FASB is pondering changes in accounting for mergers and acquisitions and other forms of business combinations. It is likely that the pooling of interest method of accounting will be eliminated. As you will recall, no goodwill was recorded under the pooling method. FASB has also said that it will no longer require the amortization of goodwill. Instead, an impairment test will be conducted to determine when goodwill should be written down. Address at least two of the following three issues:

a.Most companies are acquired at a cost in excess of their book value and in excess of the fair value of their assets. Explain the possible components of this “excess cost” and the extent to which goodwill is accurately measured under existing U.S. GAAP. Explore possible mechanisms to determine the value of goodwill subsequent to the business combination and evaluate your alternatives with respect to the desired qualitative characteristics of accounting information (SFAC No. 2).

b.What is the objective of reporting consolidated financial statements? In other words, what are we trying to accomplish through the various eliminations and adjustments? With respect to multi-national corporations, what is the objective of foreign currency translation in the consolidation of foreign subsidiaries?

c.The rules regarding consolidation vary from country to country and multiple methods are sometimes permitted under the standards of a single country. Why do such differences exist? Should the SEC and/or FASB minimize differences between U.S. accounting standards and international accounting standards? Why? Do the different methodologies currently used for producing consolidated financial statements have any impact on the desirability of a potential take-over candidate? Explain.

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