Midterm #2 - Intro to Business Midterm#2 Part Three The...

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Intro to Business Midterm #2 Part Three: The Interrelated Functions of Business Part 3A: The Accounting Function: Keeping the Scorecard o Accounting : the recording, measurement, and interpretation of financial information used in business decisions o Importance and the Legal Climate the accounting scandals at the turn of the century resulted when many accounting firms and businesses failed to abide by generally accepted accountant principles Sarbanes Oxley Act – 2002: criminalizes securities fraud and strengthens penalties for corporate fraud Public Company Accounting Oversight Board Security and Exchange Commission Works with Financial Accounting Standards Board Security Fraud punishable as a felony corporate officers must personally certify lots of debate about whether this is worth all of the costs for how much we get from it Federal Sentencing Guidelines for Organizations – FSGO increased organizational accountability for misconduct management has responsibility for control and prevention of misconduct o Uses of Information: Internal versus. External Types of Accountants Public Accountant o independent professional who provides accounting services to the public (individuals or firms) for a fee o Certified Public Accountant (CPA): an individual who has been state certified to provide accounting services ranging from the preparation of
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financial records and the filing of tax returns to complex audits of corporate financial reports certification gives a public accountant the right to express, officially, an unbiased opinion regarding the accuracy of the clients financial statements Private Accountants o accountants employed by large corporations, government agencies, and other organizations to prepare and analyze their financial statements Financial Accounting o used by the company to report financial performance to any group outside the business looked at by stockholders, venders, employees, unions, customers, regulatory agencies Managerial Accounting o used internally by the company in planning and directing the course of the organization o Internal Uses: planning and directing the organizations activities cash flow : the movement of money through an organization over a time period budget : internal financial plan that forecasts expenses and income over a set period of time (major value lies in the breakdown of cash inflows and outflows) o External Uses: report the business’s financial performance to outsiders annual report : summary of a firms financial information, products, and growth plans for owners and potential investors which must be signed by a CPA stating the statement is accurate therefore termed audited o Used by managers, employees, board of directors, etc.
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