Lessons xi
Glossary of Terms xv
About the Author xvii
About the Book xix
Acknowledgments xxi
Chapter 1 Corporate Financial Reporting 1
Learning Objectives 1
Introduction 1
Illustration 1 Good News at Flash Bang Wallop plc 1
Bad News at Flash Bang Wallop plc 2
Financial Play with Actors and Plot 3
Lessons to be Learnt 3
Companies 4
Corporate Managers 6
Corporate Governors 7
Corporate Financial Statements 8
Accounting Numbers 9
Creative Accounting 10
Corporate Auditing 11
Problems for Public Accountants 12
Financial Statement Users 13
General Purpose Financial Information 14
General Legal Requirements in UK 14
Learning Objectives 16
Exercises 1â"6 17
Additional Reading 19
Chapter 2 Corporate Governance 20
Learning Objectives 20
Introduction 20
Defining Corporate Governance 21
Accountability or Stewardship 21
Legislative Developments in Corporate Governance 22
Non-accounting Regulations in Corporate Governance 24
Accounting Regulations in Corporate Governance 25
Auditing and Corporate Governance 27
Other Corporate Governance Developments 29
Audit Committees 33
Ineffective Audit Committees 34
US Developments in Corporate Governance 35
Internal Control and Internal Audit 38
Learning Objectives 40
Exercises 1â"8 40
Additional Reading 42
Chapter 3 Corporate Financial Accounting 43
Learning Objectives 43
Introduction 43
Comprehensive Package 44
Investment Decisions 47
Illustration 2 What-a-Picture Ltd 50
Share Capital 52
Long-term Lending Decisions 53
Illustration 3 Down-the-Plughole Ltd 55
Other Decisions 56
Overview of Information Needs 57
Time and Corporate Financial Reports 58
Accounting Numbers 59
Illustration 4 Rambling-Sid-Deli Ltd 60
Accounting Costs and Fair Values 61
Illustration 5 Balance Sheet Numbers 62
Accounting Conventions 63
Legal and Regulatory Requirements 67
Learning Objectives 70
Exercises 1â"5 70
Additional Reading 71
Chapter 4 Corporate Profit Statement 73
Learning Objectives 73
Introduction 73
Balance Sheet or Profit Statement Approach 74
The Profit Statement 74
Importance of Profit Statement 78
Earnings Per Share 79
Basic Relationship and Conventions 81
Illustration 6 Jam-Today Ltd 81
Basic Elements of Profit Statement 82
Illustration 7 Give-Me-A-Break Ltd 84
Exceptional Events and Transactions 90
Other Profit Statement Matters 91
Creative Accounting 93
Corporate Governance and Profit Statement 96
Other Legislative and Regulative Requirements 96
Learning Objectives 99
Exercises 1â"8 99
Additional Reading 101
Chapter 5 Corporate Cash Flow Statement 103
Learning Objectives 103
Introduction 103
Illustration 8 Would-You-Believe-It Ltd 105
Solvency, Liquidity, Cash Flow, and Profitability 108
Illustration 9 Had-Enough Ltd 110
Illustration 10 Profitability, Liquidity, and Solvency 112
Illustration 11 Accounting Profit, Working Capital, and Operating Cash Flow 114
Cash Flow Reporting 114
Disclosure of Cash Flow Statements 118
Issues with Cash Flow Statements 120
Corporate Governance and Cash Flow Statements 122
Legislative and Regulatory Requirements 122
Learning Objectives 122
Exercises 1â"6 123
Additional Reading 123
Chapter 6 Corporate Balance Sheet 125
Learning Objectives 125
Introduction 125
Basic Accounting Relationship 128
Illustration 12 Jim Jones Insurance Ltd 129
Balance Sheet Elements 130
Balance Sheet Numbers 132
Basic Balance Sheet 134
Illustration 13 Runalot Sports Ltd 134
Other Balance Sheet Matters 141
Issues in Balance Sheet Reporting 148
Creative Accounting 151
Corporate Governance and Balance Sheets 154
Other Legal and Regulatory Requirements 155
Learning Objectives 156
Exercises 1â"7 157
Additional Reading 159
Chapter 7 Other Corporate Statements 161
Learning Objectives 161
Introduction 161
Secondary Financial Statements 162
Statements from Board and Others 168
Chairmanâs Report 168
Report of Board of Directors 170
Operating and Financial Review 176
Other Statements and Corporate Governance 178
Legislative and Regulatory Requirements 179
Learning Objectives 180
Exercises 1â"8 180
Additional Reading 184
Chapter 8 Corporate Auditing 185
Learning Objectives 185
Introduction 185
Corporate Audit Report 186
Illustration 14 Test, Tick, & Attest, Registered Auditors 186
Nature and Purpose of Corporate Audit 190
Feasibility of Corporate Auditing 194
Independent and Competent Auditors 196
Corporate Auditorâs Duty of Care 198
Responsible for What and to Whom? 199
Corporate Auditing and Fraud Detection 200
Audit Evidence 203
Corporate Auditing and Corporate Governance 204
Audit Expectations Gap 204
Legal and Regulatory Provisions for Corporate Auditing 205
Learning Objectives 208
Exercises 1â"8 208
Additional Reading 210
Chapter 9 Creative Accounting 213
Learning Objectives 213
Introduction 213
Preliminary Definitions 214
Nature and Purpose of Creative Accounting 215
Acceptable Accounting Practice 216
Flexibility of Accounting 218
Creative Accounting in Practice 219
Creative Accounting and Reporting Issues 230
Creative Accounting and Corporate Governance 233
Learning Objectives 234
Exercises 1â"6 234
Additional Reading 236
Chapter 10 Corporate Financial Statement Analysis 238
Learning Objectives 238
Common-size Analysis 239
Comparisons of Accounting Numbers 241
Nature and Purpose of Financial Ratios 246
Financial Ratio Criteria 249
Financial Ratio Limitations 250
Computation and Interpretation of Financial Ratios 252
Financial Ratios and Profitability 253
Financial Ratios and Liquidity and Cash Flow 257
Illustration 15 Just-In-Case Ltd and On-the-Button Ltd 268
Financial Ratios, Structure, and Performance 270
Learning Objectives 275
Exercises 1â"11 275
Additional Reading 279
Index 280
