We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byDiana Howell
Modified over 2 years ago
a © 2001 Arthur Andersen. All rights reserved. The Accountants Role in the New Economy Robert A. Johnson February 5, 2001
1 © 2001 Arthur Andersen. All rights reserved. Agenda Characteristics of the New Economy New Economy Impact on Management New Economy Impact on Accounting and Auditing New Economy Accounting Issues
2 © 2001 Arthur Andersen. All rights reserved. The External Context Has Changed Convergence Consolidation Globalization Privatization Emerging markets/trade shifts Deregulation Currency Crises Technology innovation Strategic alliances Recession? Core competence focus Knowledge Intellectual capital Intangible economy Supply chain integration Communications infrastructure e-Business Brand Corporate governance Investor pressures Change in social/cultural patterns Generation X
3 © 2001 Arthur Andersen. All rights reserved. Implications for Companies and Accountants New competitors Complex transactions Premium upon knowledge Political/ economic instability New skill needs Cross border sales Rising cost of labor Accelerating product cycles Core competencies focus Volatility of value New distribution channels Pricing pressure New business opportunities
4 © 2001 Arthur Andersen. All rights reserved. The Risk Gap is Growing Unacceptable Risk Gap Business Risks Ability to Manage Risks
5 © 2001 Arthur Andersen. All rights reserved. Business Risk Managers Worry They Cant Keep Up Does your company have a formal risk management process? Yes 30% Yes, But Inadequate 31% Dont Know 6% No 33% Source: 1997 EIU Study
6 © 2001 Arthur Andersen. All rights reserved. The New Economy Requires A New Management Paradigm
7 © 2001 Arthur Andersen. All rights reserved. Exploding Risks
8 © 2001 Arthur Andersen. All rights reserved. The Old Audit Paradigm Business Environment, Processes and Decisions Business Data Accounting and Management Information Financial Statements and Management Reports RealityInformation About Reality
9 © 2001 Arthur Andersen. All rights reserved. The New Audit Paradigm Financial Statements and Management Reports Accounting and Management Information Business Data Business Environment, Processes and Decisions RealityInformation About Reality
10 © 2001 Arthur Andersen. All rights reserved. New Audit Paradigm
11 © 2001 Arthur Andersen. All rights reserved. Understand the Business Assess Client Risk Controls Determine Residual Audit Risk Manage Residual Audit Risk The Business Audit Better audit Helps clients manage better Risk focus Control reliance Plank #1: A New Audit Paradigm: the Business Audit
12 © 2001 Arthur Andersen. All rights reserved. Understand the Business Assess Client Risk Controls Determine Residual Audit Risk Manage Residual Audit Risk UNDERSTAND THE BUSINESS In depth business analysis to address: What are the key business and financial reporting risks the company is facing? How does business information flow through the company, and what are the related risks? How do key risks impact the companys financial reporting? How effective is the company in identifying, sourcing, and measuring these risks?
13 © 2001 Arthur Andersen. All rights reserved. Assess Client Risk Controls Understand the Business Determine Residual Audit Risk Manage Residual Audit Risk ASSESS CLIENT RISK CONTROLS How does the company control key risks? How does the company know its risk control processes are operating effectively?
14 © 2001 Arthur Andersen. All rights reserved. Determine Residual Audit Risk Understand the Business Assess Client Risk Controls Determine Residual Audit Risk Manage Residual Audit Risk DETERMINE RESIDUAL AUDIT RISK Are there any risks not reduced to an acceptable level? If so, what elements of the business risk management process and risk control processes are not operating effectively?
15 © 2001 Arthur Andersen. All rights reserved. Manage Residual Audit Risk Understand the Business Assess Client Risk Controls Determine Residual Audit Risk Manage Residual Audit Risk MANAGE RESIDUAL RISK What additional company actions or audit procedures will reduce the specific risk to an acceptable level for purposes of the financial statement audit? What recommendations will we make to the company to improve its business risk management process and risk control processes?
16 © 2001 Arthur Andersen. All rights reserved. New Economy Accounting Issues New Economy Drives Accounting Issues/Risk –Rapid rate of change –Lack of traditional audit trail –Mix of high volume of relatively uniform transactions and limited number of unique complex transactions –Capital market volatility and nontraditional value measures
17 © 2001 Arthur Andersen. All rights reserved. New Economy Accounting Issues Proactive SEC Drives Accounting Issues/Risk –October 1999 New Economy letter –SAB 101 –SAB 99 –Blue Ribbon Commission –APB 20 Interpretation
18 © 2001 Arthur Andersen. All rights reserved. New Economy Accounting Issues Business models are changing rapidly –Software ASP Hosting Complex arrangements –Multiple elements –Strategic partnerships Each party may provide products/services to the other May involve equity instruments –Cash may pass back and forth Cash may not be indicator of fair value
19 © 2001 Arthur Andersen. All rights reserved. New Economy Accounting Issues Back to back transactions –May not be contractually linked –May not occur at the same time Swaps or exchanges are common –Product for products –Product for technology –Product for services
20 © 2001 Arthur Andersen. All rights reserved. New Economy Accounting Issues Various Accounting Literature May Apply –SOP 97-2 (software) –EITF 00-3 (hosting) –EITF (barter transactions) –EITF (gross vs. net) –SAB 101 (SEC revenue recognition) –EITF 00-8 (equity received for services) –EITF (multiple element arrangements) –SOP 81-1 (contract accounting) –FASB 68 (funded development) –EITF (equity issued for services) –APB No. 29 (nonmonetary transaction) –EITF (magnitude of boot)
21 © 2001 Arthur Andersen. All rights reserved. New Economy Accounting Issues Key Risks –Software accounting or some other model? –Identifying back-to-back transactions Documents may not link them May not occur at the same time –How to value various elements VSOE/fair value not established Residual method/undelivered elements
22 © 2001 Arthur Andersen. All rights reserved. New Economy Accounting Issues Valuation of equity instruments –Private company issues –Future accounting/impairment Valuation of other nonmonetary assets Impairment of nonmonetary assets received Is the earnings process complete? What is the business purpose of the transaction/transactions?
23 © 2001 Arthur Andersen. All rights reserved. The Accountants Role in the New Economy There is an increased need for accountants in the New Economy, but with new skills: –Better understanding of business processes –Deeper technology skills –Technical research capability –A solid analytical framework
Accounting update September Page 1 Presenters Josh Paul, Securities & Exchange Commission Chris Holmes, Ernst & Young James Barlow, Allergan.
Purchasing and Supply Chain Management by W.C. Benton Chapter Two Purchasing Decisions And Business Strategy McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill.
Supply Chain Management Workshop Buenos Aires, 13 de Agosto de 2004.
IT FINANCIAL SERVICES MANAGEMENT PRESENTED TO: SIR OMMAR HAYAAT. BY MUHAMMAD SUHAIL ASLAM AND SABIR AHMED. MS-IT BIZTEK KARACHI. PAGE 1.
1 A Standard Setting Perspective on Current Issues Facing the Accounting Profession Accounting Programs Leadership Group February 2004 Katherine Schipper.
Adding Value to Your e-business with IBM Tivoli Performance & Availability Solutions Manage Your Technology Master Your Business Customer Name Speaker.
1 Guriqbal Singh Jaiya Director. SMEs Division Accounting of Intellectual Property Assets: an Overview.
Leveraging Patents to Finance Life Sciences Companies Geneva, July 20, 2006 World Intellectual Property Organization Roya Ghafele,
1 Winning Strategy John Viljoen (PhD) 19 October, 2012.
Chapter 15 Economics and Justification of Electronic Commerce.
Audit Planning, Understanding the Client, Assessing Risks, and Responding Chapter 06 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc.
2-1 Copyright 2009 McGraw-Hill Australia Pty Ltd PPTs t/a Managerial Problem Solving by Wood Slides prepared by Robert Wood, Julie Cogin and Jens Beckmann.
1 ICS 462 Information Systems Strategy & Implementation 2.1 Analytical Tools in Strategic Management: Strategic Analysis.
Business Plan Brief summary of Executive Summary and Business Plan.
The Commercialization of Technology Dr. Michael Stankosky.
Hall, Accounting Information Systems, 7e ©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly.
10-1 McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
Performance Management and Evaluation Multimedia Slides by: Gail A. Mestas, MAcc, New Mexico State University Chapter 7.
Jan Hofmann Senior Analyst Think Tank of Deutsche Bank Group Financing based on intellectual capital Valuation and vehicles WIPO Geneva – Sept 14, 2007.
Chapter 1 Overview of Electronic Commerce. EC 2006Prentice Hall 2 Learning Objectives 1.Define electronic commerce (EC) and describe its various categories.
1 Strategy Implementation Strategic Entrepreneurship Organizational Structure and Structure and Controls Corporate Governance Strategic Leadership Strategy.
1 Management must consider both financial and operational performance measures Measures should be linked with company goals and strategy Financial measures.
1 Chapter 13 Information Technology Economics. 2 Learning Objectives Identify the major aspects of the economics of information technology. Explain the.
1 Chinese Taipei, The Trade Agreements offer benefits for the countries that provide both the consumer side and producers, whether large, medium.
Chapter 5 B2B E-Commerce: Selling and Buying in Private E-Markets.
1 of 21 Information Strategy Developing an Information Strategy © FAO 2005 IMARK Investing in Information for Development Information Strategy Developing.
1 Mary Oates, PhD Vice President, Global Quality Operations Pfizer Management of Outsourced Activities and Purchased Materials: Addressing the Interfaces.
Economic Capital and Risk Modeling February 22, 2008 Iowa Actuaries Club Session #2 Jeff Fitch, Senior Actuary - Corporate.
1-3 The Aim of the Course To develop and apply technologies for valuing firms and for planning to generate value within the firm Features of the approach:
I NTERNAL A NALYSIS STRATEGIC MANAGEMENT ผศ. ดร. พิพัฒน์ นนทนาธรณ์
© 2016 SlidePlayer.com Inc. All rights reserved.