Ch10 Corporate Governance and Financial Reporting

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Corporate Governance

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Governance activities influence public perception of an entity's citizenship responsibilities.

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Corporate Governance

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involves business ethics, social responsibility, equitable treatment of stakeholders, full and fair disclosure, and board responsibilities.

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Public Company Accounting Oversight Board (PCAOB)

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Acts as a watchdog of the accounting and auditing profession.

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Financial Reporting Misstatements

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Big R: Re-issue full financial statements for material errors.
Little r: Revise immaterial misstatements or adjustments in normal business.

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Sarbanes-Oxley Act of 2002

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Enhanced regulations for financial accounting and reporting, requiring numerous restatements from 2004-2006, tighter controls, and improved reliability.

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Earnings Manipulation

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Includes recording revenue too soon, bogus revenue, boosting income with unsustainable activities, and shifting expenses to alter financial periods.

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Cash Flow Manipulation

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Involves shifting financing cash inflows to operating activities, moving operating cash outflows to investing, and inflating cash flow using acquisitions or disposals.

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Boosting operating cash flow using unsustainable activities

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A method of manipulating financial metrics to appear more favorable.

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Key Metrics Manipulation

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Involves showcasing misleading metrics that overstate performance and distorting balance sheet metrics to avoid showing deterioration.

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General Organization of Notes to the Financial Statements

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Includes Income Statement, Statement of Comprehensive Income, Balance Sheet, Statement of Cash Flows, and Statement of Equity.