Submitted by: Submitted by goosielynn
Views: 998
Words: 1049
Pages: 5
Category: Business and Industry
Date Submitted: 09/12/2010 02:17 PM
Auditing a Publicly Traded Company
Generally Accepted Principles are a set of guidelines that governs a set of framework of accounting principles for companies reporting their financial statements for users. A discussion on an evaluation of shared-based payment reporting and SPE reporting, how to treat shared-based payment and accounting consolidation theory as it relates to special purpose entities.
Auditing a Publicly Traded Company
Description of consistency with Generally Accepted Accounting Principles
A company adopts theories that influence various accounting and reporting procedures.
Clarke, Cathey, and Schroeder (2005, p. 471) states “the proprietary theory implies the firm is
owned by some specified person or group. The ownership interest may be represented by a sole
proprietor, a partnership, or a number of stockholders. The assets of the firm belong to these
owners, and any liabilities of the firm are also the owner’s liabilities. This theory holds that all
profits or losses immediately become the property of the owners, and not the firm, whether or not
they are distributed.” The company exists to process transactions for clients and distribute
surplus. For example, a company offers shares and the company calculates and presents earnings
per share figure on the balance sheet.
Clarke, Cathey, and Schroeder (2005, p. 472) states “the essence of the entity theory is
that creditors as well as stockholders contribute resources to the firm, and the firm exists as a
separate and distinct entity apart from these groups. The assets and liabilities belong to the firm
and not to the owners. As revenue is received, it becomes the property of the entity, and as
expenses are incurred, they become obligations of the entity. Any profits belong to the entity and
accrue to the stockholders only when a dividend is declared. Presently, accounting practice
makes a sharp distinction between debt and...