N1609 Advanced Financial Accounting

Problem Set, November 2023 (A1)

This problem set is worth 25% of your overall assessment in this module.  It is to be submitted on Canvas > Assignments > Problem Set T1 Week 7

Submission Deadline: London Time 16:00 on 17th November 2023

Guiding Word Count: 1,000 words +/- 10% (excluding references and appendices) in length.

Question 1 – Qualitative characteristics of financial information (50 marks, around 400 words)

On London Stock Exchange website >> Prices and Markets page: https://www.londonstockexchange.com/live-markets/market-data-dashboard/price-explorer, filter by clicking ‘Sector’. Select a sector of your interests and click ‘Apply filters’. Then in ‘Market cap (£m) tag’, select ‘Highest-lowest’. Explore the ranking list. (1) Choose a company which has a relatively large market capital size/higher ranking one; and (2) choose a much smaller company as the comparison/much lower ranking one. Use the Table below as a guided structure to analyse the financial reporting quality of both companies, from the four enhancing qualitative characteristics of financial reporting perspectives. You are required (1) to find the relevant statements in their annual reports and (2) to paraphrase or summarise them, to evidence the quality of reporting, from the four perspectives respectively, and (3) to make suggestions to the company, which may report with a lower quality, to improve. You could write in four paragraphs, instead of using a table. One statement is required for each box to be concise.

This question is to assess the module Learning Outcome 4 (LO4, mapping with Course LO1 and LO5): apply critical thinking skills to various financial accounting and analysis scenarios.

Question 2 – Creative accounting (50 marks, around 600 words)

Find the reports and materials published online and in press about a corporate scandal (excluding the Enron scandal) of your choice in a country where IFRS applies (check here: https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-jurisdiction/). You are required to analyse the accounting scandal and the consequential company failure.

You are required to answer the following two questions:

1) Identify two specific accounts manipulation problems of your chosen accounting scandal and explain the seriousness of them (e.g. a fraud or creative accounting, illegal or unethical). Cite the relevant research literature where necessary. See the lecture contents to understand the difference between fraud/illegal accounting practice and creative accounting/earnings management.

2) Reflect on the role of professional ethics in financial reporting, what are the ethical implications and impacts of this scandal on society? In other words, what could be done to prevent such scandals from happening, from the application of the fundamental qualitative characteristics of financial reporting principles perspective?

Guidance:

You are required to use AI language generator (e.g. ChatGPT) as a research assistant where applicable to help you to contextualise the question and the possible draft answers. However, any texts generated by any AI language generator in your research and analysis process are required to be submitted in an Appendix attached to your answers to the above two questions, which are not included in the word count nor being marked. You need to show the improvement in your final answers, from the AI generated texts, To:

· Include the page number of the referenced parts of the annual reports and other references that you used;

· Summarise or paraphrase the AI generated texts to evidence your learning;

· Correct the AI generated texts with reference to the academic references or the latest information that is missing from the AI used database.

· Improve the expression, being more relevant to the question context with specific examples and the appropriate application of principles.

This question is to assess the module Learning Outcome 2 (LO2, mapping with Course LO3 and LO4): evaluate the ethical implications of financial accounting disclosure practices for various external user groups. Specifically, this question is to assess your understanding on:

i. How poor financial reporting practices (i.e. companies insufficiently fulfill the qualitative characteristic of financial reporting requirements) would affect and/or interact with the companies’ adoption of creative accounting/earnings management practices?

ii. What are the different forms of creative accounting/earnings management in practice?  What are the differences between illegal accounting practices and creative accounting practices?

iii. The importance of accounting professional ethics.

Please note that accounting scandal and company failure would not necessarily mean that this company went bankruptcy. The companies may still exist, yet the accounting scandals have been reported and the wrong doings have been penalised.

General Requirements to Question 1 and 2:

Your answers are to be your own work.  You are to use Harvard referencing style. to reference any material you have directly or indirectly taken from other sources.  Accounting standards may be cited by simply giving the abbreviation for the standard (IAS, IFRS, etc.), its number and the paragraph to which you refer. There is no lower- or upper-word count limits for each of your answers to the questions. The overall word count is suggested to be 1,000 words +/- 10%. You will not get penalised if you write longer than 1,000 words, up to 2,000 words.

Marks will be awarded according to the University of Sussex Business School Generic Assessment Criteria 2020. Please make sure you watch the video under Marking Scheme(s) on  https://canvas.sussex.ac.uk/courses/28288/pages/assessment-information and read the ‘Expected at level 6’ carefully before writing up your answers. Marks will be given based on the quality of your writing from 5 perspectives including: (1) Knowledge & Understanding, (2) Application, (3) Critical Thinking, (4) Reading & Research, and (5) Presentation & Style. (Teamwork criterion is irrelevant to this assessment.) Your submission will be checked for plagiarism automatically using the Turn-it-in.