mahendra r gujarathi
Bentley College
ralph j McQuade
Bentley College
Abstract: Assessing the appropriateness of accounting policy has assumed heightened importance with intense scrutiny of accounting matters by investors and regulators in the post-Enron era. Recently, the chief accountant of the SEC (Wall Street Journal, 2/12/2002) stated that companies and auditors must ensure that financial statements portray the underlying economics of a transaction in a faithful manner. This is especially true in cases where definitive accounting guidance is unavailable. The SAI case allows instructors to demonstrate that although a definitive pronouncement might not be available for every accounting issue, significant guidance can be developed from the careful identification and critical application of the existing concepts, principles, practices, and pronouncements. It enhances the appreciation for the role of judgment in accounting decision-making, identification of the appropriate sources of generally accepted accounting principles (GAAP) and their authoritative status, understanding and application of the technical literature, and evaluating accounting policy in the context of an entitys business strategy and potential reactions of the capital market participants. The case serves as a basis for developing functional, personal and broad business perspective competencies identified by the AICPA (1999).
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