Acc 499 assignment 3 capstone research project

1. ACC 499 Assignment 3 Capstone ResearchProject
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Assignment 3: Capstone Research Project
Due Week 10 and worth 440 points
Assume you are the partner in an accounting firm hired to perform the audit on a fortune 1000
company. Assume also that the initial public offering (IPO) of the company was approximately
five (5) years ago and the company is concerned that, in less than five (5) years after the IPO, a
restatement may be necessary. During your initial evaluation of the client, you discover the
following information:
The client is currently undergoing a three (3) year income tax examination by the Internal
Revenue Service (IRS). A significant issue involved in the IRS audit encompasses inventory
write-downs on the tax returns that are not included in the financial statements. Because of the
concealment of the transaction, the IRS is labeling the treatment of the write-down as fraud.
The company has a share-based compensation plan for top-level executives consisting of stock
options. The value of the options exercised during the year was not expensed or disclosed in the
financial statements.
The company has several operating and capital leases in place, and the CFO is considering
leasing a substantial portion of the assets for future use. The current leases in place are arranged
using special purpose entities (SPEs) and operating leases.
The company seeks to acquire a global partner, which will require IFRS reporting.
The company received correspondence from the Securities and Exchange Commission (SEC)
requesting additional supplemental information regarding the financial statements submitted with
the IPO.
Write an eight to ten (8-10) page paper in which you:

2. Evaluate any damaging financial and ethical repercussions of failure to include the inventory
write-downs in the financial statements. Prepare a recommendation to the CFO, evaluating the
negative impact of a civil fraud penalty on the corporation as a result of the IRS audit. In the
recommendation, include essential internal control procedures to prevent fraudulent financial
reporting from occurring, as well as the major obligation of the CEO and CFO to ensure
compliance.
Examine the negative results on stakeholders and the financial statements of an IRS audit which
generates additional tax and penalties or subsequent audits. Assume that the subsequent audit and
/ or additional tax and penalties result from the taxpayer’s use of an inventory reserve account,
applying a 10 percent reduction to inventory over three (3) years.
Discuss the applicable federal tax laws, regulations, rulings, and court cases related to the
inventory write-downs, and explain the specific relevance of each to the write-down.
Research the current generally accepted accounting principles (GAAP) regarding stock option
accounting. Evaluate the current treatment of the company’s share-based compensation plan
based on GAAP reporting. Contrast the financial benefits and risks of the share-based
compensation stock option plan with the financial benefits and risks of a share-based stock-
appreciation rights plan (SARS). Recommend to the CFO which plan the company should use,
and provide the correct accounting treatment for each.
Research the reporting requirements for lease reporting under GAAP and International Financial
Reporting Standards (IFRS). Based on your research, create a proposal for future lease
transactions to the CFO. Within the proposal, discuss the use of off-the-balance sheet financing
arrangements, capital leases, and operating leases, and indicate the related business and financial
risks of each.
Create an argument for or against a single set of international accounting standards related to
lease accounting based on the global market and cross border leases of assets. Examine the
benefits and risks of your chosen position.
Examine the major implications of SAS 99 based on the factors you discovered during the initial
evaluation of the company. Provide support for your rationale.
Analyze the potential for a material misstatement in the financial statements based on the issues
identified in your initial evaluation. Make a recommendation to the CFO for the issuance of
restated financial statement restatement. Identify at least three (3) significant issues that can
result from the failure to issue restated financial statements.
Examine the economic effect of restatement of the financial statements on investors, employees,
customers, and creditors.

3. Use five (5) quality academic resources in this assignment. Note: Wikipedia and other Websites
do not qualify as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all
sides; citations and references must follow APA or school-specific format. Check with your
professor for any additional instructions.
Include a cover page containing the title of the assignment, the student’s name, the professor’s
name, the course title, and the date. The cover page and the reference page are not included in
the required assignment page length.
The specific course learning outcomes associated with this assignment are:
Analyze accounting situations to apply the proper accounting rules and make recommendations
to ensure compliance with generally accepted accounting principles.
Analyze business situations to determine the appropriateness of decision making in terms of
professional standards and ethics
Use technology and information resources to research issues in accounting.
Analyze business situations and apply advanced federal taxation concepts.
Write clearly and concisely about accounting using proper writing mechanics.