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Detecting Creative Accounting Practices

Course materials	CPE hours	Cost
Includes book	10	$85

Learning Objective:

The learning objective of this course is to equip the financial statement reader to better detect the use of creative accounting practices and avoid the equity-investment and credit-granting mistakes.

The Financial Numbers Game provides a clear explanation of the ways in which management can stretch, bend, and break accounting rules to reach the desired bottom line.

Prerequisite: None

Course level: Basic

Advanced preparation: None

Teaching method: Text and Online study

Recommended hours: 10

Summary of Contents:

Financial Numbers Game
How the Game is Played
Earnings Management: A Closer Look
The SEC Responds
Financial Professionals Speak Out
Recognizing Premature or Fictitious Revenue
Aggressive Capitalization and Extended Amortization Policies
Misreported Assets and Liabilities
Classification and Disclosure
Pro-Forma Measures of Earnings
Problems with Cash Flow Reporting

Lesson and Objectives	Reading Assignment
1. Introduction	Chapter 1
The learning objectives for this lesson are to gain an understanding of: • Where you are financially • Setting goals • Developing a plan • Simple record keeping • Making an informal budget • Dealing with shortfalls, credit, and debt • Financial planners
2. Building Wealth to Meet Your Goals	Chapter 2
The learning objectives for this lesson are to gain an understanding of: • Retirement plans • Savings plans • Inheritance and other unexpected windfalls
3. Building Your Wealth Through Investment Planning I	Chapter 3
The learning objectives for this lesson are to gain an understanding of: • Setting your financial goals • Investment vehicles
4. Building Your Wealth Through Investment Planning II	Chapter 4
The learning objectives for this lesson are to gain an understanding of: • Financial markets and concepts • Developing an investment strategy
5. Building Your Wealth Through Investment Planning III	Chapter 5
The learning objectives for this lesson are to gain an understanding of: • Implementing your strategy • Monitoring your investments
6. Building Your Wealth Concluded	Chapter 6
The learning objectives for this lesson are to gain an understanding of: • Mutual funds • Foreign investments • Real estate • Gold • Investing for retirement
7. Life Insurance	Chapter 7
The learning objectives for this lesson are to gain an understanding of: • Life insurance options
8. Other Insurance	Chapter 8
The learning objectives for this lesson are to gain an understanding of: • Health insurance • Disability insurance • Property/casualty insurance • Auto insurance • Umbrella policies
9. Estate Planning	Chapter 9
The learning objectives for this lesson are to gain an understanding of: • How to calculate your estate • Objectives • How to provide for liquitity • Minimizing taxes • The importance of periodic reviews
10. Estate Taxes and Deductions	Chapter 10
The learning objectives for this lesson are to gain an understanding of: • The valuation of estate property • The marital deduction
11. Gift Taxes/Generation-Skipping Transfer Tax	Chapter 11
The learning objectives for this lesson are to gain an understanding of: • The advantages of making gifts • The generation-skipping transfer tax
12. Sophisticated Estate Planning	Chapter 12
The learning objectives for this lesson are to gain an understanding of: • Trusts • Asset transfer techniques
13. Estate Liquidity, POA, and Living Wills	Chapter 13
The learning objectives for this lesson are to gain an understanding of: • Rasing cash to pay taxes • Durable powers of attorney • Living wills and health care powers of attorney • Periodic review and follow-up
14. Getting Married	Chapter 14
The learning objectives for this lesson are to gain an understanding of: • Timeing your marriage from a tax standpoint • Integrating Insurance and other benefits • Investment planning for couples
15. Raising a Family	Chapter 15
The learning objectives for this lesson are to gain an understanding of: • One or two incomes? • New costs • Investment planning for parents • Insurance planning for parents • Estate planning for parents • Income tax planning for parents • Wedding costs
16. Coping with Divorce	Chapter 16
The learning objectives for this lesson are to gain an understanding of: • Working with advisors • Calculating total assets and liabilities • Determining new living expenses • Determining the financial planning consequences of alimony • Determining the financial planning consequences of child support • Determining the financial planning consequences of property divisions • Dealing with the investment aspects of divorce • Dealing with the retirement planning aspects of divorce • Dealing with the insurance aspects of divorce • Dealing with the estate planning aspects of divorce
17. Being a Single Parent	Chapter 17
The learning objectives for this lesson are to gain an understanding of: • Hidden costs • Sources of income • Saving for college • Financial planning as part of the divorce agreement • Property • Declaring children as dependents • College funds
18. Buying and Selling a Home	Chapter 18
The learning objectives for this lesson are to gain an understanding of: • Buying versus renting • Financing your home • Selecting your home • Refinancing your mortgage • Selling your home • Tax consequences of a home sale
19. Funding a College Education	Chapter 19
The learning objectives for this lesson are to gain an understanding of: • Starting early • Choosing an affordable college • Determining how much you will need • Developing a savings program • Selecting investments • Saving money through your child's tax bracket • Borrowing to pay for college • Obtaining financial aid and scholarships
20. Taking Advantage of Employment Benefits	Chapter 20
The learning objectives for this lesson are to gain an understanding of: • Insurance options • Savings opportunities • Income tax reduction vehicles • Separating from a job
21. Starting Your Own Business	Chapter 21
The learning objectives for this lesson are to gain an understanding of: • Determining how to start • How to create a business plan • Deciding which business structure makes sense • Using advisors • Determining capital sources • Using your home as your office • Hiring employees
22. Dealing with Your Parents	Chapter 22
The learning objectives for this lesson are to gain an understanding of: • Early adulthood • Middle age • The later years
23. Losing Your Spouse or Life Partner	Chapter 23
The learning objectives for this lesson are to gain an understanding of: • Working with advisors • Calculating total assets and liabilities • Determining new living expenses • Duties of an executor or executrix • Valuation of estate property • Survivor long-term planning
24. Planning for Retirement	Chapter 24
The learning objectives for this lesson are to gain an understanding of: • Goals • Estimating your retirement expenses • Deciding if you want to retire • Choosing where to live • Health care and other insurance issues • Saving and investing for retirement • Dealing with Social Security
25.Health Care and Insurance Needs	Chapter 25
The learning objectives for this lesson are to gain an understanding of: • Risk management • Life insurance during retirement • Pension maximization • Medicare • Medigap insurance • Private health insurance after retirement • Long-term care

Sample Exam Questions:

1. Income smoothing is defined as:

a. The active manipulation of earnings toward a predetermined target.

b. Intentional misstatements in financial statements done to deceive users.

c. Hiding high payouts to CEOs.

d. A form of earnings management designed to remove peaks and valleys from a normal earnings series.

2. The most common earnings management technique observed by the survey participants was:

a. Timing of revenue recognition.

b. Change in inventory accounting method.

c. Timing of expense recognition.

d. Change in accounting policy.

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