Congress compelled the PCAOB to back off the proposal to require auditor rotation. Why? Do you think Mr. Pozen’s idea of requiring a request for proposal (RFP) every 15 years is a good one? Why or why not? What problem is it supposed to address?
Why do you think the PCAOB wants to change the auditor’s report? Who would benefit from knowledge of the “critical audit matters”? How would they benefit? What are potential downsides to requiring auditors to report such information?
What exactly is the problem with equity research analysts’ involvement with bankers who want to underwrite an IPO? Who gets hurt by this relationship between the analysts and the bankers? What should be done to alleviate the problem?
Why do stock prices jump even when a firm (such as Telsa) reports a loss? What role does “expectation” play in stock prices? Do you think the market reacts more to GAAP results or non-GAAP results? If you think the latter, what does this suggest about the relevance of GAAP?
Do you support the authors’ argument that a federal insurance policy for pensions for bankrupt cities is a good idea? What is your opinion about the potential hazard of cities unloading their pension burdens should such a backstop become a reality?
Would you make an investment decision based on the pay ratio of CEO pay to that of the average worker? Why or why not? Who (else) might find the pay ratio useful? Why?
If you were a mutual fund manager, how would you determine which IPO shares to buy? Why do you think investment banks have the stated rules for allocating IPO shares? Go to retailroadshow.com and critique a road show of a firm that is about to IPO.
Have you ever read an audit opinion letter? If so, did you understand it? Do you know what “present fairly,” “reasonable assurance,” “material misstatements,” and other such phrases really mean? What do you think about re-doing the audit opinion letter in the way proposed? Would the proposal make the letter easier to understand or more useful?
Who do you think is responsible for the unfunded pension liabilities in several major municipalities, like Detroit? What would you propose be done about the unfunded liabilities? Do you believe that accounting measurement and recognition standards have played a part in masking the severity of the problem? In bankruptcy, how would you decide which creditors should be paid?
Do you believe some executives are “overpaid”? How would you measure overpayment? Do you believe that proposed “pay gap” disclosures would lead to beneficial changes in pay practices? How?
What is your opinion about corporate insiders selling their firms’ stock before a bankruptcy filing? Should there be changes in laws governing insider sales?
If they “have it all,” why do execs commit fraud? Do you agree with the arguments presented in the article?
So, the pay for top 200 CEOs climbed by 16% from 2011 to 2012. Why? In your opinion, what should pay packages be linked to that is different from what they are currently? Or, is the current (average) pay/performance linkage acceptable?
Name one argument for and one against mandatory auditor rotation? What is your opinion: should firms be required to rotate their auditors? If so, how often?
Do you agree that the “relevance of accounting information is decreasing”? Are the new financial metrics to measure firm performance an indicator of market participants’ impatience with the FASB addressing lack of relevance? Will the FASB lose its own relevance?
Do you think it is a good idea for the EU to go from requiring quarterly reporting to semi-annual reporting? Why or why not? Who benefits from this change? Who is hurt by this change?
Zynga announced a restructuring plan for the current quarter and filed an 8K with the SEC. Was Zynga required to file the 8K? What is the purpose of the restructuring? What is the journal entry to record the restructuring, if any? Will Zynga make any journal entry to accrue cost savings under the restructuring plan?
Do you think a computer program that analyzes word patterns in the MD&A can be a good predictor of fraud in the financial statements? Will firms learn to alter their wordings, knowing that the SEC is using word patterns as a detection device?
The Effective Tax Rate is measured as Tax Expense / Pre-tax Income. Is it more informative to measure this ratio using “Cash Taxes Paid” in the numerator? Why or why not? Where do firms report the amount of cash taxes paid?
