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02-Y18032002-MN7262.edited.docx - MN7262 - Accountability,...

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MN7262 - Accountability, Representation, and ControlAn Evaluation of Patisserie Valerie Misstatement
IntroductionAccording toAuthority (2018), an annual financial report is a report that contains comprehensiveevents and transactions that took place in the previous financial year. Therefore, organizationsare obligated to provide their stakeholders with a piece of detailed financial information withregards to the past period to shed a light of what took place in the company.Melis and Aresu(2019)asserts that the importance of financial information is attributed to the fact that they act asa true representation of the company’s financial information. In this regard, it is important to notethat accounting goes hand in hand with accountability.Lo, Ramos and Rogo (2017)asserts thatprepares of financial statements should be held accountable whenever any accountingmalpractices is noted on the accounting records. This was the case with Patisserie Valerie wherea black hole was discovered in the company's financial records. A severe and potentiallyfraudulent accounting and irregularities were noted on the company's financial records. Thismaterial misstatement led to the company losing some of its stores and forcing the company toseek alternative ways to raise funds to keep the company afloat. In this premise, this essay seeksto evaluate how accounting representation might have enabled this fraudulent misstatement, howaccounting institutionalizes the concept of accountability in organizations, the parties that shouldbe held responsible for accounting misstatement, and how efficiency has affected thedevelopment of accounting control systems.How accounting representations might have enabled fraudulent misstatement at PatisserieValerie incidentEzzamel, Lilley and Willmott (2004)asserts that accounting representation is a fair view of thefinancial statements which are free from material misstatements. The main objective ofaccounting representation is to provide a positive picture of the company with regards to itsfinancial position. However,Yang and Modell (2015)asserts that despite this objective, financialstatements are vulnerable to manipulations for the fulfilment of various interests as it was thecase for Patisserie Valerie. Through accounting representation, the management team ofPatisserie Valerie was able fraudulently to misstate their financial statements to paint a positiveimage of the company at the capital markets.Drake, Quinn and Thornock (2017)asserts thatinvestors, lenders, and other stakeholders utilize the financial statement of a company whenmaking key investment decisions. As such, Patisserie Valerie exploited the accountingrepresentation techniques to portray a positive financial status of the company so that it could

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Term
Summer
Professor
Dr Patrick Ajwang
Tags
International Financial Reporting Standards, Patisserie Valerie

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