Critically Evaluate the Reasons for the HIH Insurance Scandal in Australia - Accounting Assignment Help

Assignment Task:

Task:

•  
• Critically evaluate the reasons for the HIH Insurance scandal in Australia. Discuss how this scandal happened in the Australian corporate sector despite checks & balances in the regulatory system.
• (5 marks)
• ‘Corporate management could misstate operating activities and external users would be unable to readily discern the fraud. Hill et al. (2003) suggest cash ?ow from operations is the hardest component of the statement of cash ?ows to understand yet it is one of the most used ?gures in determining available cash in the future.’
• Hill, R., Benston, G.J. and Hartgraves, A. (2003),
• “Measuring corporate performance: the perils of turning to cash ?ow”,
• Public Utilities Fortnightly, Vol. 141 No. 10, pp. 20-22.
• Required:-
• Discuss the common steps used to operating income components of discontinued operations and demonstrates the utilization of cash flow associated with debt and equity investments. (3 marks)
• b). Critically evaluate how to use adjusted operating cash flow to uncover earnings that have been misreported using aggressive or fraudulent accounting practices. (2 marks)
• “One of the major impacts of accounting scandals is that consequences often stretch far beyond the immediate con?nes of the ?rm. The impact of accounting scandals and, more pervasively, creative accounting can thus be divided into the short-term, immediate effects on those involved and longer, more diffuse effects. The immediate consequences are that the company itself often either collapses, is taken over, or at the very minimum its share price slumps and investors lose money”.
• (Michael John Jones
• Creative Accounting, Fraud, and International Accounting Scandals
• John Wiley & Sons Ltd, the Atrium,
• Southern Gate, Chichester, England)
• Required:
• Explain the effects of creative accounting and accounting scandals on the job performance of accountants (auditors) in reporting financial statements. (3 marks)
• Critically evaluate the short-term economic and political consequences of creative accounting practices in the corporate sectors. (2 marks)
• How can you compare the percentage rate of change in accrued expenses payable with the percentage rate of change in revenue? Explain with the help of an example. What are the implications of differences in the rate of changes? (5 marks)
• “Livent transferred preproduction costs for shows to fixed asset accounts such as the construction of theatres . . . and inflated profits by fraudulently amortizing preproduction costs over a much longer period of time”
• (Accounting and Auditing Enforcement Release No. 1095, In the Matter of Livent, Inc.)
• Required:-
• What do you mean by amortizing capitalized costs? Discuss any three steps in detecting extended amortization policies. (5 marks)

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