New Bookmarks
Year 2007 Quarter 2:  April 1 - June 30 Additions to Bob Jensen's Bookmarks
Bob Jensen at Trinity University

For earlier editions of New Bookmarks go to http://www.trinity.edu/rjensen/bookurl.htm 
Tidbits Directory --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/

Bob Jensen's Threads --- http://www.trinity.edu/rjensen/Threads.htm

Choose a Date Below for Additions to the Bookmarks File

April 30, 2007

May 31, 2007

June 30, 2007

June 30, 2007

Bob Jensen's New Bookmarks on June 30, 2007
Bob Jensen at Trinity University 

For earlier editions of Tidbits go to http://www.trinity.edu/rjensen/TidbitsDirectory.htm
For earlier editions of New Bookmarks go to http://www.trinity.edu/rjensen/bookurl.htm 

Click here to search Bob Jensen's web site if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/.

Bob Jensen's Blogs --- http://www.trinity.edu/rjensen/JensenBlogs.htm
Current and past editions of my newsletter called New Bookmarks --- http://www.trinity.edu/rjensen/bookurl.htm
Current and past editions of my newsletter called Tidbits --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm
Current and past editions of my newsletter called Fraud Updates --- http://www.trinity.edu/rjensen/FraudUpdates.htm
 

Bob Jensen's past presentations and lectures --- http://www.trinity.edu/rjensen/resume.htm#Presentations   
 

Bob Jensen's various threads --- http://www.trinity.edu/rjensen/threads.htm
       (Also scroll down to the table at http://www.trinity.edu/rjensen/ )

Roles of a ListServ --- http://www.trinity.edu/rjensen/ListServRoles.htm

Click here to search this Website if you have key words to enter --- Search Site.
For example if you want to know what Jensen documents have the term "Enron" enter the phrase Jensen AND Enron. Another search engine that covers Trinity and other universities is at http://www.searchedu.com/

Bob Jensen's Home Page is at http://www.trinity.edu/rjensen/

Accountancy Discussion ListServs:

For an elaboration on the reasons you should join a ListServ (usually for free) go to   http://www.trinity.edu/rjensen/ListServRoles.htm

AECM (Educators)  http://pacioli.loyola.edu/aecm/  AECM is an email Listserv list which provides a forum for discussions of all hardware and software which can be useful in any way for accounting education at the college/university level. Hardware includes all platforms and peripherals. Software includes spreadsheets, practice sets, multimedia authoring and presentation packages, data base programs, tax packages, World Wide Web applications, etc Roles of a ListServ --- http://www.trinity.edu/rjensen/ListServRoles.htm

CPAS-L (Practitioners) http://pacioli.loyola.edu/cpas-l/  CPAS-L provides a forum for discussions of all aspects of the practice of accounting. It provides an unmoderated environment where issues, questions, comments, ideas, etc. related to accounting can be freely discussed. Members are welcome to take an active role by posting to CPAS-L or an inactive role by just monitoring the list. You qualify for a free subscription if you are either a CPA or a professional accountant in public accounting, private industry, government or education. Others will be denied access.

Yahoo (Practitioners)  http://groups.yahoo.com/group/xyztalk This forum is for CPAs to discuss the activities of the AICPA. This can be anything  from the CPA2BIZ portal to the XYZ initiative or anything else that relates to the AICPA.

AccountantsWorld  http://accountantsworld.com/forums/default.asp?scope=1  This site hosts various discussion groups on such topics as accounting software, consulting, financial planning, fixed assets, payroll, human resources, profit on the Internet, and taxation.

Business Valuation Group BusValGroup-subscribe@topica.com  This discussion group is headed by Randy Schostag [RSchostag@BUSVALGROUP.COM]

Tidbits and Quotations Between June 1 and June 30, 2007

2007 --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm
June 1                 June 5              June 12          June 20         June 25 

Tidbits Directory for Earlier Months and Years --- http://www.trinity.edu/rjensen/TidbitsDirectory.htm

New Bookmarks Directory for Earlier Months and Years --- http://www.trinity.edu/rjensen/Bookurl.htm

Bob Jensen's Threads --- http://www.trinity.edu/rjensen/Threads.htm

Click Here for Humor Between June 1 and June 30, 2007 --- http://www.trinity.edu/rjensen/book07q2.htm#Humor063007  

Bob Jensen's complete set of Enron Updates are at http://www.trinity.edu/rjensen/FraudEnron.htm#EnronUpdates

Bob Jensen's threads on the Enron scandal are at http://www.trinity.edu/rjensen/FraudEnron.htm

Congratulations Dan!
DAN S. DEINES EARNS 2007 AICPA DISTINGUISHED ACHIEVEMENT IN ACCOUNTING EDUCATION AWARD --- http://accountingeducation.com/index.cfm?page=newsdetails&id=144962

Over the years Dan has been an outstanding accounting teacher at Kansas State University. He also has been a leader in service to education and the accounting profession.

He is very deserving of this award.

"So you want a new desktop accounting package?" by David Carter, AccountingWeb, June 5, 2007 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=103569

David does not mention my oft-preferred alternative of a Webledger system (such as NetSuite) that can be accessed at a range of needs and sizes and prices with some huge advantages over installing accounting software on your own hardware --- at http://www.trinity.edu/rjensen/Webledger.htm

"Top Technologies for Accounting Pros Announced," SmartPros, June 11, 2007 --- http://accounting.smartpros.com/x57964.xml

Bob Jensen's helpers on accounting software alternatives are http://www.trinity.edu/rjensen/Bookbob1.htm#AccountingSoftware

Fraud Detection Software

"A Risk-Based Approach to Journal Entry Testing: How software can help auditors detect fraud," by Richard B. Lanza and Scott Gilbert, Journal of Accountancy, July 2007 --- http://www.aicpa.org/pubs/jofa/jul2007/lanza.htm 

The top-side journal entry is most susceptible to fraud by management override. It’s possible to make adjustments in subledgers, but this requires collusion with other organizational departments, which is much harder to accomplish.

The most frequent types of management fraud involve fictitious or premature revenue recognition. One way this can occur is through management override of internal controls.

SAS no. 99 requires external auditors to test journal entries; internal auditors and forensic examiners may find it helpful in designing their procedures to test journal entries. AICPA Practice Alert 2003-02 provides additional guidance for implementing SAS no. 99 and discusses using computer- assisted audit tools to improve test effectiveness.

Data analysis is a critical component for testing journal entries. Testing exclusively by manual means is probably not the most effective approach.

Tests should use the Who, What, When, Where and Why methodology. Like any tool, computer-assisted testing has its limitations. It does not replace a skilled auditor or fraud examiner. But rather, automation allows the auditor or fraud examiner to focus his or her energy on the highest-risk journal entries culled from a full set of entries rather than on a random sample.

Bob Jensen's threads on fraud are at http://www.trinity.edu/rjensen/fraud.htm

Crazy Eddie Fraud Update Years Later

June 26, 2007 message from Richard Campbell [campbell@RIO.EDU]

This 80's fraudster will be interviewed tomorrow at 10:00 PM (CNBC) - I have shown the ABC video from teh 80's on the Crazy Eddie fraud to my accounting students and they love it - The fraud includes skimming, stock manipulation, inventory fraud and marital infidelity and flight to avoid prosecution. The students frequently ask "what ever happened to Crazy Eddie". Now I'll be able to answer.

Richard

Richard J. Campbell
mailto:campbell@rio.edu

June 26, 2007 reply from Elliot Kamlet [ekamlet@STNY.RR.COM]

And for those really interested, Eddie's cousin Sam http://www.whitecollarfraud.com/index.html  who was sent to accounting school to become a CPA who could improve on fraud methods at the company is available for speaking engagements, absolutely free.

He gives a really interesting presentation, including the video to which you referred. However, it would have been better at 2 hours instead of 2.5 hours. I would still recommend him.

Elliot Kamlet
Binghamton University

Bob Jensen's fraud updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

Accounting Rule Is Eased for Foreign Companies
Federal regulators tentatively agreed Wednesday to ease an accounting requirement for foreign companies that trade on United States exchanges. The action by the Securities and Exchange Commission paves the way for a related change that would allow public companies to choose between international and United States accounting standards when reporting financial results. The step taken by the S.E.C. on Wednesday would eliminate a requirement for foreign companies to reconcile their financial results with United States standards called generally accepted accounting principles, or GAAP. Foreign companies, which already adhere to what are called international financial reporting standards, say the S.E.C. mandate is burdensome and costly. The change, which awaits formal adoption after a 75-day public comment period, would apply to 2008 annual reports, which are submitted in early 2009.
Associated Press, "Accounting Rule Is Eased for Foreign Companies," The New York Times, June 21, 2007 --- http://www.nytimes.com/2007/06/21/business/worldbusiness/21sec.html

Bob Jensen's threads on standard setting are at http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#144a

Free Tax Tutorials for Professors and Students
Tax Analysts, a non-profit pubic service organization that provides in-depth tax information resources for tax professionals, has announced it is making its news and research products available at no charge to accounting, law, and economics professors and their students.
AccountingWeb, June 28, 2007 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=103676

See http://taxprof.typepad.com/taxprof_blog/files/tax_analysts_campus.pdf

Bob Jensen's tax helpers are at http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation

Free accounting and tax course materials are linked at http://www.trinity.edu/rjensen/Bookbob1.htm#Materials

Accounting for Price Levels

June 27, 2007 message from Ganesh M. Pandit, DBA, CPA, CMA [profgmp@HOTMAIL.COM]

This is slightly outside of the usual accounting-related topics.

Is the "core inflation", defined without including food and energy prices, similar to how companies report EBITDA? If so, how useful is that inflation information? Anybody??

Ganesh M Pandit
Adelphi University

June 27, 2007 reply from Bob Jensen

Keep in mind that inflation adjustments are intended for changes in the general purchasing power of a currency such as the U.S. dollar. They are not specific price adjustments for the things companies themselves purchase.

The CPI is calculated on the basis of the most common things consumers buy. It has not been constant over time as consumers shifted preferences toward more services. See http://www.fingaz.co.zw/fingaz/2004/October/October28/6927.shtml

The Core CPI and PCE Deflators suffer distortion associated with the index for the cost of owner occupied housing, the so-called Owners Equivalent Rent (OER) component. The extent of the problem in the CPI is somewhat more pronounced simply because the weight of the OER component in the CPI is greater than in the PCE deflator, but the underlying story is the same.

We have addressed these problems in past commentaries. For example, we outlined the broad issues at had in CPI--The Owners Equivalent Rent Debate (June 15, 2006). We discussed how falling utilities costs had the perverse affect of boosting OER and Core consumer prices in Understanding the CPI--Hurricane Katrina and OER (June 21, 2006).
"Wrestling with the Comfort-Zone and Distorted Core Inflation," by Ray Stone --- http://www.smra.com/comfort_m.asp

Back in the 1970s, very large companies were required to provide supplementary general inflation and specific index price adjusted financial statements under FAS 33. FAS 33 was later rescinded due to cost versus benefits of this information with respect to relatively low inflation rates in the U.S. Also there were huge error levels due to the crude way companies were allowed to make these pricing adjustments.

The vexing problem is that even under U.S. inflation rates, FAS 33 adjustments sometimes had enormous impacts. For example, the impact on U.S. Steel Corporation at the time was enormous and highly negative. In a few instances, the adjustments for other companies were positive, especially those with heavy debt burdens in times of inflation.

Analysts did not complain much when FAS 33 was dropped. Their claim was that they got the information elsewhere. My belief is that they did not and could not get this information easily without inside information which they probably did not have access to at the time.

For more on FAS 33 see http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#UnderlyingBases

The snipped version is at http://snipr.com/accountingvaluation

Bob Jensen

Accounting Software in the Classroom

June 7, 2007 message from Ray Slager [slgr@CALVIN.EDU]

I wonder if anyone is currently using commercial software in their courses. I tried to use QuickBooks at one time but the company makes it very difficult to use. First of all it must be loaded on each computer - not on the network. Secondly it needs to be updated each quarter for the payroll module to work and of course the entire package must be "upgraded" every two or three years. Does anyone know if this is still the case?

Does anyone use other commercial software that is easier to administer? I currently am using MYOB and find it very easy to use. I currently am looking at their latest version and think it is very promising. It can be loaded on a file server and comes in a "10 pack" - good for use on 10 computers for about $300.

Ray Slager
Calvin College

June 7, 2007 reply from Davidson, Dee (Dawn) [dgd@MARSHALL.USC.EDU]

We use Peachtree and get the software free for the network. Use this link. http://www.peachtree.com/training/educational_partnerships.cfm 

Find the license and application forms. Fax them to Peachtree and the software CD will be mailed to you. They send you last year's version - we just received 2006 - but the changes are very minimal year to year. Each spring we send in the forms and get a new CD to be installed on the network for the following school year. We develop our own exercises, but they also have education material available. Hope that helps.

dee davidson
Leventhal School of Accounting
Marshall School of Business
University of Southern California
(213)740-5018 tel (213) 747-2815 fax
dgd@marshall.usc.edu 

June 7, 2007 reply from Formosa, Jim [Jim.Formosa@NSCC.EDU]

We are using QuickBooks but are looking at Microsoft's accounting software for small business. We have the same problems you describe with QuickBooks.

Jim Formosa, MS, CPA
Certified Senior WebCT Trainer
Associate Professor of Accounting
Nashville Community College
615-353-3420 FAX 615-356-1213

June 7, 2007 reply from Fisher, Paul [PFisher@ROGUECC.EDU]

I have found that Peachtree is much better. I am running an older version, but it does not seem to matter. Peachtree provides an educational version that does not lock the student out after 25 visits, and does not have the payroll deadfall. It also has a "tutorial"

embedded that makes it almost textbook free if you are willing to produce class handouts. I am going to be attempting Timberlake for a construction program. Anyone have experience in that?

Paul

June 7, 2007 reply from Prachyl, Cheryl L [cprachyl@UTA.EDU]

I use Peachtree. They provide a free educational site license. The educational version is one year behind the currently marketed version, but I don't find that to be a problem.

I tried using Quickbooks for one semester but we had no money in our budget to purchase the software. We got a donation to the department for a one year site license but we had problems with the installation in our labs.

I have found that Peachtree works well. It also can reinforce the "cycle" approach to business through the navigation aids.

Cheryl Prachyl
University of Texas at Arlington

June 7, 2007 reply from Leslie Kren [lkren@UWM.EDU]

I use SAP in my cost management courses. SAP is the leading ERP system and using it in the classroom provides exposure to the 'big systems' most of our students see in practice. The startup cost for me was quite high several years ago, but now the SAP University Alliance is quite active and provides summer workshops and substantial assistance with instructional materials to interested faculty.

Leslie Kren, PhD, CPA
Associate Professor
Lubar School of Business
University of WI - Milwaukee
3202 N. Maryland Milwaukee, WI 53201
414 229-6075 fax: 414 229-6957
lkren@uwm.edu
http://www.uwm.edu/~lkren/ 

June 8, 2007 reply from David Fordham, James Madison University [fordhadr@JMU.EDU]

Ray,
I guess my answer is no and yes. I don't use it in class, but I use it in the course.

The first half of our basic systems course is spent on systems concepts relating transaction cycles and the traditional accounting systems flows and operations. We don't demonstrate any commercial software, we mainly concentrate on manual paper document flow to teach them the use of documents like reqs, PO's, receiving vouchers, invoices, etc. and mention that "most of this flow is now computerized." During the second half of the course, while the classroom activities are covering stuff like REA (organization), XBRL (retrieval and reporting), SDLC, information security, PoET, networking, etc., the students are engaged in a lengthy homework assignment (5 weeks long): a group project wherein they, without help or assistance from anyone, keep the books for a small hypothetical company for a month (the shoebox full of receipts concept), by using a commercial software package of their choosing.

They not only choose the package, they must buy it, and then teach themselves how to use it, on their own. This includes setting up the master files, creation of the chart of accounts (or modification of the stock chart to eliminate the hundreds of fluff accounts not required by this company), entry of the month's of data, creation of reports (including some involving the report writer), plus the internal controls necessary for the company to use their particular software package, which might involve form design and creation, etc.

The project is done in student groups (3, 4, or 5 students). The students must first evaluate several packages, and then get approval from the professor for the package of their choice. Since I don't use a textbook for the main part of the course, I expect them to pool and spend their "Textbook" money on a legal copy of the commercial software ($150 per student should give them about $400-700 for software, although some groups try to find suitable packages for under $300). I'd say the average group spends about $400 for their software.

The case is complex enough that the "demo" versions and the low-end versions of packages like Quickbooks and Peachtree absolutely won't suffice. In fact, even the mid-range versions won't be usable UNLESS the group goes to a heckuva lotta trouble designing manual internal controls, in which case their controls usually begin interfering with the efficiency and effectiveness of operations. What's more, low-end package groups often must resort to additional tools to provide some of the required reporting information: excel, etc., and eventually their accounting "system in toto" begins to get quite cumbersome. Students learn valuable lessons in software features versus advertising, features vs. usability, software-based controls vs. manual controls, etc. Plus, during the evaluation phase, they get to compare packages based on the criteria we cover in the first part of the course vis-a-vis the handling of the critical/non-critical data elements, transfer of data between job fun! ! ctions within the company, etc.

They learn one package well enough to put it on their resume, and they get some exposure to one or two others. The fact that they learn it on their own surprises most of my colleagues from my generation, but I've found that after having the accounting system concepts explained to them, and getting some "manual or semi-automated" transaction cycles demonstrated and illustrated, they can pick up the software a whole lot better than my generation. They use the tutorials, they use on-line help (they can use any aid except for a living human -- they can't use email help, for example -- but they can use existing on-line user group posts, blogs, etc. as long as they haven't posted something to the source in question). They get two 30-minute "consulting" sessions with the professor if they get in trouble. Most groups need at least one of those sessions, but I never need to teach them how to use the software, their problems are usually more related to efficiency vs. controls.

Yes, it is a boatload of work, for both the students and for me. But the project counts the same as one of the two major exams, and although they complain about the amount of work while they are doing it, in the end, their deliverable is immensely personally satisfying. Very few of them recocmmend dropping the project from the course (or even scaling it back) in the end-of-course evaluations.

The ability of today's students to rise to the challenge of teaching themselves the intricacies of today's complex commercial software is truly amazing to some gray-haired baby boomers like myself. Thus, I don't spend class time on any commercial package anymore.

(Yes, some groups do make some mistakes in their selection, and learning from their mistakes often turns out to be one of the most effective learning strategies.... this is education, after all, and mistakes aren't fatal.)

So we use commercial accounting software in the course, but not in class.

David Fordham
James Madison University

June 10, 2007 reply from Tom Sentman

Hi David,

I really like your approach to exposing students to accounting software in your class.

Do you teach this course to beginning or second year students?

What are some of the accounting software packages your students have used?

Is there a way that I could obtain an outline and/or syllabus for your course? It would be most appreciated.

Tom Sentman
Springfield, MO

June 11, 2007 reply from David Fordham, James Madison University [fordhadr@JMU.EDU]

Tom, my course is designed to be taken in the junior year, but some put it off until the first semester senior year. Students arrive having taken principles 1 and principles 2, plus Intermediate 1. Some have also taken Intermediate 2, Tax, and a few have even taken Cost. My course is the pre-req for auditing.

Students have used lots of different packages, but the high-end Peachtree Pro Plus, Great Plains, Microsoft Small Business Pro, and similar packages (those in the $250 to $500 price range) seem to be the most popular. My case calls for more than simple 'sell four products to two customers'. It requires departmental sales reporting, consignment, commissions, differing terms for different customers, taxable and non-taxable sales, different tax rates, freight prepaid and collect, FOB shipping point and destination, and even some non-traditional stuff (I call them "easter eggs" because the students have to find them -- critical thinking exercise!) such as a sale that isn't really be a sale, a sale that might or might not be a sale, a purchase that isn't really a purchase, etc... I don't stick to the easy accrual/deferral stuff, I want them to have to stop and think. The reports I ask for are analyses not normally found in the $19.99 packages.

I use Blackboard for the course, and my institution is pretty stingy with the guest log-ins since we put copyrighted materials on our Blackboard webs. Can you give me a personal email and I'll shoot you a PDF copy of the syllabus and course calendar.

The case is one that I came up with. I've been using it and polishing it for about 15 years, and about a dozen other AIS profs (including Nancy Bagranoff) have used it too, but no one is interested in publishing it -- I'm too busy to waste time coming up with the darn "learning bjectives", "teaching notes", and "assessment instruments" junk that the gatekeepers demand these days. (I'm at the point in my career where I don't have to lick quite as many boots as I used to, back in the days when I was young and foolish...) I'll be happy to send you the case and give you permission to use it if you think it would help your students. Like I said, it basically is an exercise in thinking as well as software learning. What I like about it is that the students have to do this "on their own", with only two "consulting sessions", so it forces them to think before they come into my office. It is amazing how many students rise to such a challenge and can think and think well when calle! ! d upon. And as I said before, learning software is something that the kids today can do with their eyes shut (... or glued to their iPhone, or YouTube, or MySpace, etc.)

David Fordham
PBGH Faculty Fellow
James Madison University

June 18, 2007 message from Norman Sheehan [sheehan@COMMERCE.USASK.CA]

I teach a senior undergrad class in management control, which includes performance measurement and risk management.

I would like to employ a Management Control Simulation which asks students to make decisions regarding these areas, but have been unable to find any.

The strategy field has a number of computer simulations (Globus, StratSim, etc.) which apparently are a great help in providing students opportunities to develop and hone their strategic thinking competencies.

I am wondering if anyone has heard of similar online-based simulations for management control?

Thanks in advance,

Cheers,

Norman T. Sheehan
U of Saskatchewan

 

May 18, 2007 reply from Bob Jensen

You might look into Mike’s Bikes --- http://sag.sagepub.com/cgi/content/citation/35/4/525?ck=nck 

I really admire the works of Pete Mazany at the University of Auckland. Pete studied under the great Martin Shubick at Yale.

Also see

http://users.cs.dal.ca/~smedley/veu/materials/wong/wongs.pdf 

http://doi.contentdirections.com/mr/mgh.jsp?doi=10.1036/0072829869

 

"D&T Launches Corporate Governance Web Site," SmartPros, June 12, 2007 --- http://accounting.smartpros.com/x57989.xml 

Deloitte & Touche USA LLP has launched a corporate governance Web site.

Accessible at www.corpgov.deloitte.com , the Center for Corporate Governance Web site is a publicly available resource that offers regularly updated governance information for boards of directors, C-suite executives, investors, attorneys and others interested in governance.

The site has four main content sections: audit committees, board governance, compensation committee, and Deloitte periodicals.

"The Web site provides a 'one-stop shop' for boards and committee members to find governance thought-ware which includes perspectives from various experts on the latest governance topics and best practices as well as tools and resources to assist them in fulfilling their responsibilities as board members," said Steve Wagner, managing partner for the Center for Corporate Governance.

Bob Jensen's threads on corporate governance are at
http://www.trinity.edu/rjensen/fraud001.htm#Governance

IBM Misleads Investors
The Securities and Exchange Commission has announced a settled enforcement action against International Business Machines Corporation for making materially misleading statements in a chart concerning the impact that the company's decision to expense employee stock options would have on its first quarter 2005 (1Q05) and fiscal year 2005 (FY05) financial results. The misleading chart caused analysts to lower their earnings per share (EPS) estimates for the company. Linda Chatman Thomsen, Director of the SEC's Division of Enforcement, said, "Information regarding a company's earnings is one of the most important factors that many investors consider in making an investment decision, and it is essential that the information companies provide be clear and accurate."
Andrew Priest, AccountingEducation.com, June 15, 2007 ---
http://accountingeducation.com/index.cfm?page=newsdetails&id=145059 

The external independent auditor for IBM is PricewaterhouseCoopers (PwC) --- http://www.trinity.edu/rjensen/fraud001.htm#PwC

Bob Jensen's threads on FAS 123(R) are at http://www.trinity.edu/rjensen/theory/sfas123/jensen01.htm

Bob Jensen's Fraud Updates are at http://www.trinity.edu/rjensen/FraudUpdates.htm

Faked Sales at Fujitsu

From The Wall Street Journal Accounting Weekly Review on June 15, 2007

Fujitsu Finds Bogus Accounting at Unit
by Jay Alabaster
The Wall Street Journal
May 08, 2007
Page: A11
http://online.wsj.com/article/SB118123860931027976.html?mod=djem_jiewr_ac

TOPICS: Accounting, Accounting Irregularities, Advanced Financial Accounting, Auditing, Consolidation, International Accounting

SUMMARY: Fujitsu Ltd. announced that a subsidiary, Fujitsu Kansai Systems Ltd. of Osaka, has booked fictitious sales. The irregularity involved booking circular sales at the request of NAJ Co., an Osaka technology company that went bankrupt in May. "The news follows a spate of accounting mishaps at other Japanese companies, in industries as diverse as frozen foods and technology, which have hurt investor confidence in Japan's accounting standards and prompted regulators to crack down on the auditing industry." Questions relate to the nature of materiality and audit planning for subsidiaries with low impact on overall consolidated or group operating results, including consideration of the greater possibility of collusion under a keiretsu form of organization.

QUESTIONS:
1.) Describe the nature of the irregularity found at Fujitsu Ltd.'s subsidiary. In your answer, define the term "accounting irregularity."

2.) Describe the Japanese system of corporate relationships commonly described as a "keiretsu." How might this structure contribute to the nature of an accounting irregularity and impact the way in which an audit is conducted?

3.) Describe a likely audit approach to handling audits of subsidiaries with minor impacts on group or consolidated earnings. Why might an audit structure allow for accounting irregularities in these circumstances to be undetected, perhaps for several years?

4.) Given that the impact of this irregularity on group earnings is expected to be minor, why would the facts lead to investor mistrust in reported earnings? In your answer, comment on the loss of 3.2% of Fujitsu share values following this news about a minor impact on the company's overall earnings.

5.) Define the term "materiality." Is the Fujitsu subsidiary's accounting irregularity material? Support your answer and defend it against opposing viewpoints based on statements made in the article.

Reviewed By: Judy Beckman, University of Rhode Island

"Fujitsu Says Unit Booked Bogus Sales," by Jay Alabaster, The Wall Street Journal, June 8, 2007; Page A14 --- Click Here

Confidence in Japanese corporate accounting took another blow as Fujitsu Ltd. said a subsidiary had booked fictitious sales, the latest case of improper bookkeeping at a major Japanese electronics maker.

The conglomerate said the impact on group earnings would be minor but warned that other companies may be involved with the bogus accounting at the software-consulting and sales unit.

The news follows a spate of accounting mishaps at other Japanese companies in industries as diverse as frozen foods and technology, which have hurt investor confidence in Japan's accounting standards and prompted regulators to crack down on the auditing industry.

"It is a matter of trust," said an analyst at a major Japanese brokerage firm. "The market will lose confidence in the results of these companies."

Fujitsu shares fell 3.2% to 820 yen ($6.77) on the Tokyo Stock Exchange following the news, as the benchmark Nikkei Stock Average of 225 companies recovered from an early drop to end slightly higher.

Spokesmen at Fujitsu and subsidiary Fujitsu Kansai Systems Ltd., based in Osaka, said the amount, timing and details of the improper sales were still being investigated. The transactions involved NAJ Co., a seller of information-technology products and services in Osaka that went bankrupt in May, the companies said.

"At the request of NAJ, at least one employee of this company engaged in 'circular sales transactions,' " said the spokesman at Fujitsu Kansai Systems. "Such transactions require at least three companies," which consecutively book revenue from sales of items that are eventually sold back to where they started, he said.

The spokesman said he didn't know the identity of other companies that might be involved, or if they willingly booked fake sales. "We are reviewing our receipts one-by-one," so it will take time before the details are known, he said.

The Fujitsu situation evoked comparisons to accounting problems at NEC Corp., which last year revealed an engineering subsidiary had logged fake business deals. Some analysts questioned if current accounting oversight was sufficient to oversee the complex dealings of such companies. Fujitsu had 393 subsidiaries and about 161,000 employees as of March.

Last year, NEC said an internal probe found an employee at its NEC Engineering Ltd. unit had fabricated business deals on a vast scale for years, inflating sales figures by 36.3 billion yen from the fiscal year ended March 2002.

"Given the similar businesses of both NEC and Fujitsu, people may begin to wonder why accounting problems are affecting these two," said Motomi Hiratsuka, head of trading at BNP Paribas in Tokyo.  

Bob Jensen's threads on revenue accounting are at http://www.trinity.edu/rjensen/ecommerce/eitf01.htm

Advanced Managerial Accounting Textbooks

June 17, 2007 message from abuali twaijry [aat1420@YAHOO.COM]

Any suggestion for books in Advanced Managerial Accounting?
Al-Twaijry

June 17, 2007 reply from Richard C. Sansing [Richard.C.Sansing@DARTMOUTH.EDU]

If your teaching style is economics based, Demski's Managerial Uses of Accounting Information is an excellent source of content (albeit a bit heavy going.)

Richard Sansing

June 17, 2007 reply from Bob Jensen

If your teaching style is economics based, Demski's Managerial Uses of Accounting Information is an excellent source of content (albeit a bit heavy going.)

Richard Sansing

June 17, 2007 reply from Bob Jensen

Hi Richard,

Several drawbacks of Demski's book as a current textbook are as follows:

1. Demski's book was published in 1993. This makes it nearly 15 years old in terms of content. But then economics is ageless --- right? Actually much of the competitions' texts are even older (e.g. the advanced managerial accounting books of McGee (1986) and Kaplan (possibly out of print). Many accounting programs have been dropping the Advanced Managerial Accounting courses in favor of other courses in AIS, not-for-profit, and advanced financial accounting content.

2. Barnes and Noble has a list price of $205 subject to discount by BN club members. Amazon has a $84.95 price but may have some trouble replenishing such an old book. Interestingly a limited supply of used copies are available for under $10. Heavy discounting of used copies could be age related as well.

3. End of chapter real-world problems and teaching notes/solutions are disappointing as a textbook.

Amazon does allow readers to search free inside the book before buying the book, which is often a terrific advantage of Amazon.

As an alternative you might consider the 2004 "Strategy Maps" book by Robert Kaplan and David Norton. This deals heavily with how to make better use of intangibles.

You might also consider a collection of cases from various sources. Some of these cases are excellent --- http://www.trinity.edu/rjensen/Bookbob1.htm#BooksAndCases 

June 17, 2007 reply from J. S. Gangolly [gangolly@CSC.ALBANY.EDU]

Bob,

I have used just about every "advanced" managerial text in existence. I found none of them to be satisfactory mainly because they did not contribute significantly to the overall understanding/integration of accounting by the students, and either lack of coherence or theme.

Last year that I taught such a course, I decided to move entirely out of the traditional accounting texts, and taught a course using an operations management text augmented by a bunch of Harvard cases and a strong introduction to industry analysis. The text I used was

Business Process Modeling, Simulation, and Design Manuel Laguna and Johan Marklund Prentice Hall, 2005

Surprisingly, the students took to the course very well. You can find the course outline at http://www.albany.edu/acc/courses/acc630.fall2006/acc630f2006.doc 

Jagdish

June 17, 2007 reply from JOHN STANCIL [jstancil@VERIZON.NET]

I use the Ansari modules published by HM. They are somewhat dated, but I find them useful.

John Stancil

June 17, 2007 reply from Patricia Doherty [pdoherty@BU.EDU]

The choice of text depends on just how you plan to run the course - what you want to teach. For advanced students there are two books I particularly like. One is the Hilton, Maher Szelto (I'm not sure I have that last spelling correct) book (McGraw Hill) and the other is Atkinson, Kaplan, Matsumura and Young (Pearson Prentice Hall). The latter is now in 5th edition. It is a difficult book, but I really like it. The students have to "fully engage" in this one, it takes no prisoners, but it is a very good book.

p

Earnings (but not cash flow) Volatility Caused Largely by FAS 133
Freddie Mac and its main rival, Fannie Mae, are recovering from scandals several years ago in which they were found to have violated accounting rules to make their results look less choppy. Because they have adopted stricter practices, their results tend to fluctuate widely, as changes in interest rates and default expectations whipsaw the value of mortgage-related assets. Last year, for instance, Freddie had big losses in the third and fourth quarters but still managed to report net income of $2.21 billion for the year. In the latest quarter, "accounting developments exacerbated the appearance of some of these developments" in the mortgage market, said Richard Syron, Freddie's chairman and chief executive.
Damian Paletta and James R. Hagerty, "Freddie's Stricter Accounting Renders a Loss," The Wall Street Journal, June 15, 2007; Page A2 --- http://online.wsj.com/article/SB118182226301335242.html?mod=todays_us_page_one

Bob Jensen's FAS 133 and IAS 39 tutorials are at http://www.trinity.edu/rjensen/caseans/000index.htm

New Accounting Rule Lays Bare a Firm's Liability if Transaction Is Later Disallowed by the IRS

From The Wall Street Journal Accounting Weekly Review on June 1, 2007

Bob Jensen's accounting theory helpers are at
http://www.trinity.edu/rjensen//theory/00overview/theory01.htm

Auditors and Fraud Inquiries (Video) --- http://accounting.smartpros.com/standard/smartsurvey/jhcohn.asp

Tutorial:  FIN 48 from different perspectives
Financial Accounting Standards Board Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, is intended to substantially reduce uncertainty in accounting for income taxes. Its implementation and infrastructure requirements, however, generate a great deal of uncertainty. This feature provides an overview of FIN 48, addresses some of its federal and international tax issues, as well as issues arising at the state and local level.
AccountingWeb, June 2007 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=103625

Bob Jensen's threads on FIN 48 are at
http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#FIN48

It seems to me that the university crossed the line for this professor pleading for our help!
AECM (Worldwide Accounting Educator ListServ)  --- http://pacioli.loyola.edu/AECM

Can you help our AECM friend with helpful thoughts or useful references?

June 10, 2006 plea from an anonymous friend

Bob, for the AECM,

I swear that trouble keeps following me around. There is no need for me to look for it. It is always there and eager to zap me.

The computer that my university provides is four or five years old. After the hard drive went out for the second time this year (it had gone out at least two times previously), after the zip drive fried my disks, after the usb port fried my flash drives, after the computer inexplicably turned itself off again and again and again, I turned in the computer and bought my own so I could get my work done.

I thought everything was great. I now had a wireless card that worked, I now had a battery with more than 15 minutes of power, and the programs I used hummed along at a nice pace.

I took this computer with me when I proctored a final exam in May. Somehow, a student walked away with my flash drive. OK, I had recent backups of everything. Since it had some current and older grade files on it (I was working on grades during the exam), I decided to report it to Information Technology Services. Isn't that what you are supposed to do?

What I've learned so far. There is a data breach on several levels. I am solely and personally responsible for this data breach, and will be publicly identified as so, when my university makes its announcement. The university attorney says that what I did was illegal. My university has exercised its right of ownership over anything and everything I have written during my 17 years of university employment. I am no longer allowed to have a copy of any document/file I've produced during this period, or any document in any way related to the university. IOW, nothing university related or my work as a professor can be in my possession at all. They took my personal laptop, home desktop, old home desktop, old floppy disks, papers at home, papers in the office and my personal cell phone (it has some voice mails related to university business). My wife begged and they didn't take my son's desktop (even though I have occasionally used it for backup). Since I'm out of town now for the next ten weeks, they have my laptop, desktops and cell phone for an extended period of time. Could any AECMer go ten weeks without a computer? Or a cell phone?

Obviously, my university has adopted a policy of razing everything--burn it now and ask questions later. I'm loyal to the university, I'm cooperating. My 110 page syllabus for second semester intermediate (and the genesis for a new textbook)--gone. My web site--gone. My e-mails and their attachments--gone. I think that any software involved in creating a document or file related to the university is also gone. Certainly the business computer games that I'm studying for a paper are gone. My complete and work-in-process papers-- gone.

I wonder what this means for my family and myself. I reason that the university wants every scrap of my intellectual creations so that when they turn me out, I have nothing to take with me. I reason that since I've been informed that I've done illegal activities, I better get a lawyer. If I'm out of a job (or suspended at the U), the university's tuition waiver program will be unavailable to them for continuing their education. And of course, my bill paying ecological system is very fragile. My hoped-for-benefits from the university pension plan are now frozen. How much is this going to affect me during retirement?

Lessons for the future.

My university does not provide any means for backing up a professor's work files, hence my use of floppy, zip and flash drives. It now recognizes that it better have something in place (either automated or at least a policy).

Where is the internal control over grade files that a professor creates and uses? I suspect that the university's external auditor will be taking a look at this next year (and this should be done so for all colleges and universities).

Professors still have a need for having files in their possession. Since thefts/losses can occur at any time (and should be expected), perhaps the university should have some sort of centralized file storage that professors can access whenever they have a need for the file.

If the university truly owns any intellectual property that I create, is it responsible for getting my papers published? After all, if I seek a particular journal outlet for a paper, can I be held responsible if later on an administrator thinks I should have submitted it to a better or different journal? What If I seek and get publication for a junk paper, and the university is embarrassed by its low quality? What about a textbook? Will the author royalties now go to the university? If I use a syllabus one semester, what permission do I need in order to use any verbage from it again? Do I now need permission for working on any project?

The university still won't give me a computer for the coming year (it had already been decided prior to the start of this mess). I won't be allowed to use my personal machine for work (if I get to keep my job). How does a professor survive in 2007 without any technology?

The investigation and remedy for this data breach are in its early stages. I may have misunderstood something, and anyone of the several individuals could have told me something in error.

Turning yourself in is like pissing into the wind.

Oh yeah, how do I get a job for 2007-2008 at this late date?

I'll try to mooch some computer time off someone so I can read the AECM archives.

Joe AECM,
ADF State University

June 10, 2007 reply from Richard Campbell [campbell@RIO.EDU]

Bob:

That is a terrible story. I would have recommended contacting his own personal attorney first, who could have contacted the university authorities under an attorney-client privilege and made a deal for him as an anonymous professor..

On a practical note, it encouraged me to buy the following product for my flash drives --- http://www.roboform.com/pass2go.html  

And on a related note in respect to university attorneys:
About 7 years ago our university attorney (from Baker and Hostetler) gave us our annual mandatory seminar on avoiding sexual harassment. The attorney ended the session in discussing what would happen if a faculty member was accused of sexual harassment. Her statement was that “We fire the faculty person first and worry about a wrongful termination suit later!”

I like remind my colleagues about that statement on occasion, particularly when we are negotiating a contract.

So the next thing your friend should do is get a LABOR attorney.

Richard J. Campbell
School of Business
218 N. College Ave.
University of Rio Grande
Rio Grande, OH 45674
Voice:740-245-7288
http://faculty.rio.edu/campbell 

June 10, 2007 reply from J. S. Gangolly [gangolly@CSC.ALBANY.EDU]

Bob,

It is a sad, but quite prevalent situation.

I used to store most of my important stuff on my university provided unix workstation. Once, while applying a security patch, a novice IT person by mistake reformatted my hard drive, and I lost close to a few gigabytes of valuable research data, drafts of papers, grades, rosters,... The university asked me is they should retrieve them from backups. Since I am fairly close to retirement, I told them that it was ok. The poor culprit lost his job even though I, in some way, pleaded leniency for him.

The lesson is: if you are doing official work use official media for storage. When you sign a contract as a professor you do not sign also to serve as a sys admin, sys security admin, ... We are teachers, not systems people.

I think there are ways we teachers can protect ourselves, and there are things universities should be doing:

WHAT WE CAN DO:

1. Use encryption on drives if possible

2. Put as much info as possible on university servers; that way, if there are breaches due to their negligence we can tell to hang themselves

3. ALWAYS use secure flash drives and use complex passwords (with special characters, upper and lower case letters, numbers)

WHAT THE SCHOOLS CAN DO:

1. Provide physical security by locking down computers (a bunch of laptops were stolen on our campus last week, but fortunately most of sensitive data resides on mainframes and servers))

2. Insist that faculty use only secure flash drives

3. Encourage awareness of vulnerabilities and threats by faculty

4. Hang those who are caught violating university security/usage/privacy policies

5. PROVIDE MASS STORAGE TO FACULTY FOR BACKUP OF ALL THEIR OFFICIAL WORK AND INSIST THAT THEY WORK EXCLUSIVELY THROUGH UNIVERSITY VPN AND SAVE ALL WORK ON SUCH STORAGE WHEN EVER THEY WORK OFF CAMPUS

I am lucky that my university does everything above except 2 and 5.

I have been complaining about 5 for years, but the solutions are very expensive.

It is precisely this clamour for "personal" computing that started this whole thing. It is like a cute little rabid puppy that bites you when you least expect it.

Shame on the university that hung out a Professor out to dry.

I really would like to know the name of the school.

Unless irresponsible schools are flogged in public they will continue to shirk their responsibility, or worse, pass them on to the faculty.

Regards,
Jagdish

June 10, 2007 reply from Bob Jensen

I've never heard of anything like this. It's truly absurd. Your university is apparently running very scared of being sued for not doing enough to protect student privacy information, but it seems they've gone a bit overboard in this respect. It's more like the university is on a hunt to find some added reason to terminate you.

I suggest that you carefully read the ITS policy statements and the Faculty Handbook. If faculty were never warned about what has happened to you I think you have the makings of a very good lawsuit.

I seriously doubt that ADF State University has the right to your family's own privacy information that is not on the university's hardware. I think that only the courts have a right to issue a search warrant your family's private property, and I doubt very much that the courts would issue a search warrant in this instance if there is no highly criminal suspicion such as child porn suspicion. Your university might claim that you did something illegal, but ADF State University did not ask the courts to issue a search warrant your private property. My guess is that the courts would've refused to issue a search warrant in this instance.

If it came down to it, your attorney would have a lot of fun with this one. My guess the threat of being sued by you would wake your university up to what this might cost them due to damages to your family and your reputation and mental stress. But hopefully it will not come to that.

Even if you voluntarily allowed ADF State University to take over you family's private property, you volunteered under duress (e.g., fear of job loss). Once again your attorney would have a field day. At a minimum, ADF State University should've provided you and your family with computers to use while they investigated your property.

The first thing I would do is consult representatives in your Faculty Senate (or union although I doubt that ADF
 State University has a union). I would also ask for a private appointment with your Provost (Academic VP) or even the President of the university. You should investigate what ITS did in previous instances of lost grade files such as files on lost laptop computers. Are they making an exception out of you? At all times stay informed, firm, calm, and cool.

You might also consider taking your case to the AAUP. A friend/acquaintance on campus who is active in the AAUP might also be able to help. What happened to you could happen to any other faculty member at ADF State University. AAUP would be most interested in such circumstances.

You could certainly post this message in your own name, but it may be a bit too sensitive at this early stage of your negotiations with your university.

I do suggest that you commence looking for the best attorney you can find, I mean a labor attorney who eats nails for breakfast. Whether or not you actually use such an attorney depends a great deal on how soon ADF State University returns your computers.

By the way, it would seem that, if ADF State University has such restrictive policies regarding grade file storage, ADF
 State University should provide faculty with storage space on the ADF State University network combined with a policy that grades and other personal information about students not be stored in university computers, especially laptop computers that are typically taken off campus for various reasons. If this policy is not already in writing then you have a pretty good case.

Most universities provide faculty with private space on the university computing network. This space is password protected and usually backed up daily or in real time by a RAID or comparable system in case the network computer crashes.

ADF State University may have the right to share in the royalties of intellectual property you created, but ADF State University has no right to deprive you of access to your intellectual property. Also there is not even a right to share in the royalties of all your intellectual property. Rarely, for example, does a university claim a right to share royalties for textbooks. (There are some exceptions like the University of South Dakota.) Generally, universities exercise the rights to royalties only on patents and not copyrights. If ADF State University claimed a right to all your intellectual property then ADF  State University would probably have to show precedent and/or written policy in this regard.

I think it's time to bring pressures to bear on ITS. But don't do anything that would make it easier for ADF
 State University to fire a tenured professor. Thus far it would seem you've not done anything that constitutes grounds for dismissal. At all times stay informed, firm, calm, and cool. If it comes down to it, let your attorney turn up the heat.

Bob Jensen

June 10, 2007 reply from J. S. Gangolly [gangolly@CSC.ALBANY.EDU]

Unfortunately, in case of most state schools, you are a sort of officer of the state. When things go wrong, the book that is thrown at you is a lot heavier.

As to family private information, we are not so lucky. Each year, I am FORCED to divulge all my (and my spouse's) assets to the state. One year that I delayed, I was threatened that my pay would be stopped and also fined unless I divulged the information by a certain date.

Only a sense of public service can entice a person to state schools.

The university and their state police probably got a court order for the search & seizure in the case you posted..

Jagdish

June 10, 2007 reply from David Fordham, James Madison University [fordhadr@JMU.EDU]

This situation serves to illustrate several points which I've made before. I hate to say "I told you so", but by our own stubborn inaction (lack of open rebellion) against public opinion, we are complacent co-conspirators and thus must share in the guilt of fostering the sad experience of our unfortunate colleague.

1. Information is nothing more than "knowledge".

2. Knowledge should not be subject to restriction, especially restriction to just a few elite individuals. (This lesson was supposed to have been learned by the problems of the Dark Ages.)

3. There is no such thing as privacy when it comes to knowledge (information). Nor should there be.

4. We accountants are partially at fault for the current social morass. (If we would design accounting systems properly -- to accurately and reliably capture the data we need: resource identity, event identity and AGENT identity --then a criminal could not engage in fraud merely by obtaining information, and thus the public would be far less interested in trying to restrict knowledge.)

5. Fear about public disclosure of performance measures (e.g., grades) is irrational and indefensible in a civilized society. There should be a difference between ego and injury, especially in a society which pays lip service to liberty in expression.

6. Using knowledge to commit a crime or tort should be treated the same as using a baseball bat, a knife, or a sock with a rock in it to commit a crime or tort. (The commission of the tort or injury should be illegal, not possession of the instrument used to engage in the action. In this case, theft of the flash drive should be the only theft which has occurred. If the thief uses the information to commit further tort or crimes, those should be prosecuted. The whining that "it is too hard to find and prosecute perpetrators so therefore we outlaw possession of knowledge" is as ridiculous as the whine "it is too difficult to find and prosecute perpetrators so therefore we outlaw possession of socks". Most important of all, in this case, the university seems to be punishing the owner of the socks which were stolen, even though they haven't yet been used to commit injury or tort. How rational is this?

Under point 6, it sounds like someone at the ADF State University has terribly overreacted. I had a school laptop stolen while in my possession, and none of the draconian measures described were even contemplated, let alone implemented. The laptop was later recovered, and the perpetrators are presently serving jail time. I am still trusted with school computers, school information, etc. Is there any possibility of some other reason existing for the seemingly-irrational actions of the university authorities?

(For newcomers to the list, this post should introduce me as being one who is thought of (by some on the list) as the purveyor of the some of the most outlandish controversial tripe found on the Internet. Enjoy...)

David Fordham
PBGH Faculty Fellow
Professor of Information Security
James Madison University

June 11, 2007 reply from Paul Williams [Paul_Williams@NCSU.EDU]

On 10 Jun 2007 at 17:11, David Fordham, James Madison University wrote:
5. Fear about public disclosure of performance measures (e.g., grades) is irrational and indefensible in a civilized society. There should be a difference between ego and injury, especially in a society which pays lip service to liberty in expression.

Perhaps it is time to revisit the Buckley (James, brother of William F.) Amendment to FERPA. The inability of parents to know anything about what their "children" are doing at university can be quite problematic (most vividly illustrated by the recent tragedy at VT).

If a student is permitted as a dependent on their parents tax return, then the parent ought to be able to access information about their child. I get at least one inquiry a semester from a parent about what they have been told by their children; these are concerned parents who suspect they are not getting the whole story and their suspicions are usually correct. I am powerless to help. All I can say is that I am not permitted to give out the information they want.

On our professor's plight, it does seem an extreme over reaction, but his university's policy doesn't sound any different than mine's. If you work for a private company, everthing you create with the assets they provide belongs to them. As we privatize state universities why should we be surprised that universities do likewise. The corporatized university has been written about extensively. As states withdraw public support for university activities, universities look to find other sources. At my university everything I create on the university tab belongs to the university. The policy is designed to insure that if a faculty member produces something with significant economic potential, the university will exert its claim. Thus, syllabi, academic papers (which in accounting have very little prospect of commercial potential), textbooks, etc. are not something the university is particularly interested in.

Paying lip service to academic freedom. But discoveries that lead to patents are another matter. The university always asserts its claim to anything that could be commercially lucrative. More evidence that who you vote for does matter.

Here is a radical suggestion (particularly for AECM). An anecdote (probably apocryphal): NASA spent over a million dollars to develop a pen that would write in zero gravity. If you visit Huntsville you can buy one in the gift shop. They are neat because you can work a crossword puzzle lying on your back. The Soviets, on the other hand spent nothing -- they just used a pencil! I still maintain my grades by hand on old fashioned accountants' columnar paper (I hope I manage to retire before it becomes impossible to get). I have a file cabinet with one key.

I have never had a security problem. If I am responsible for the integrity of my grades, then maybe I shouldn't carry them around with me stored in a device that will be surely stolen in an instant of inattention. Sometimes simpler is better. Some more advice: On your university's web page you will easily find the Policies (POL.) and Regulations (REG.) that govern the relationship between faculty and the institution. It's a good idea to read them. It is also not a bad idea to start taking faculty governance seriously.

To paraphrase Foucault, "The only guarantor of academic freedom is its exercise."

Paul

June 13, 2007  reply from Henry Collier [henrycollier@aapt.net.au]

If this whole episode wasn’t so sad and depraved it would have to be fiction. Why would any ‘rational / logical’ person have anything to do with a university or an IT administrator / IT system that treated its users / employees in this manner. It’s a case of systematic management abuse by administrators who appear to have authority over academic matters, while having no responsibility for teaching and / or research. If an institution treats its faculty and staff in this way, one can only wonder how the same group of administrators treats their students.

No university owns my very limited mental capacity or capability. They do not own me or my body or my soul. What legal code allows a University to invade your home and seize property? You’re an employee, not a slave! Are there any criminal charges put forward by the University against you? It would seem as though the university has far exceeded its authority by invading your personal space without charges being put before the courts. Even then, the University personnel cannot seize your personal assets … it is unlikely that the university has any right to enter your home to reclaim university owned property without your permission. There are legal processes to prevent bullying and home invasion. It would appear as though the university has failed to comply with the law.

If you have a ‘union delegate’ or a worker’s protection law in your State, then I would strongly suggest that you take advantage of them. Violations of your rights can and should be defended.

One must consider the future rather than dwelling on sunk costs and past decisions that have been proven wrong. I’d be most tempted to head off to AAA and look for something somewhere else. With the lack of supply of terminally qualified accounting teachers and researchers, there has to be a fit somewhere.

In this day and age, why would anyone use a university computer system for anything? In this day and age, computing power is so low cost that anyone can build their own computer system / network in their own home. For the most part, even sophisticated data sets are available and affordable. If the university does not support your research, then move to some university that does.

This whole sordid affair makes the US case of the ‘lost pants’ appear logical and rational.

Henry Collier
Hon Research Fellow
University of Wollongong

Need for Increased Protection of Laptops and Less Protection from the ACLU
Agents of the Federal Bureau of Investigation have been meeting with university officials in the Boston area, warning them that foreigners may be trying to steal research and offering to train faculty members on how to protect their work, The Boston Globe reported. Among the FBI suggestions are that professors never leave laptops in hotel rooms unless they are in safes, and that researchers report “unnatural or unexplained interest” in their work. An official of the American Civil Liberties Union questioned the campaign, telling the Globe that students or researchers might hesitate to ask legitimate questions if they fear that their queries could get them reported to the FBI.
Inside Higher Ed, June 12, 2007 --- http://www.insidehighered.com/news/2007/06/12/qt

"IRS Draws Lines for Political Advocacy," Doug Lederman, Inside Higher Ed, June 12, 2007 --- http://www.insidehighered.com/news/2007/06/12/irs

As the 2008 campaign begins to heat up, the Internal Revenue Service — which is responsible for carrying out federal tax law that restricts political activity by nonprofit organizations — has issued guidelines aimed at giving colleges and other tax-exempt organizations practical advice about where the lines are and how not to cross them.

The guidance, which comes in the form of a revenue ruling that has formal legal standing, lays out 21 actual situations, in areas such as voter education efforts, candidate appearances and issue advocacy — that raised questions about whether the activity a charitable organization engaged in should be considered inappropriate participation in a political campaign. Although the underlying laws and regulations are longstanding, the IRS document is an effort to formalize what have been “pretty subjective” standards about what’s allowable (or not), said Bertrand M. Harding Jr., a tax lawyer who specializes in nonprofit issues. “These offer insight into the question of ‘Does this cross the line or not cross the line?’ in fairly helpful fashion,” Harding said.

Three of the case studies — which as is typical of IRS publications, do not identify the involved parties — directly involve colleges or universities.

In one, a university president wrote in his monthly column in an alumni newsletter ("My Views") that “[i]t is my personal opinion that Candidate U should be reelected.” Although the president used personal funds to pay for the cost of his column in that one issue, “the newsletter is an official publication of the university. Because the endorsement appeared in an official publication .... it constitutes campaign intervention” by the university, the IRS concludes.

Continued in article

Bob Jensen's tax helpers are at http://www.trinity.edu/rjensen/Bookbob1.htm#010304Taxation

From IAS Plus on June 10, 2007 --- http://www.iasplus.com/index.htm

In his address at the 26th Annual SEC and Financial Reporting Institute Conference at the University of Southern California, FASB Chairman Robert H Herz spoke about Specialised Industry Accounting and Reporting: Too Much of a Good Thing? (PDF 66k). Mr Herz's remarks include an update on many of the joint FASB-IASB projects. Also, he discussed the different approaches to specialised industry standards taken by the FASB and its predecessors in contrast to the IASB. Here is an excerpt:

So without judging whether and to what extent having lots of specialized industry accounting and reporting guidance is a good or bad thing, we might ask how we got to this current state in the U.S. For while there is a certain degree of industry specific accounting and reporting guidance in other parts of the world and in IFRS, it is no where as extensive and as differentiated as it is in our country. For example, UK GAAP does not include very much of it, relying instead on broader principles and practices that have evolved, in Australia and New Zealand they have deliberately tried to avoid special accounting for different industries, focusing instead on what they term 'sector neutral' accounting, and while IFRS encompasses some industry specific accounting and disclosures, such as that relating to financial institutions and for agriculture and they are working on accounting for insurance contracts and on accounting for extractive activities (oil and gas and mining), the IASB clearly does not intend to develop U.S. style industry specific guidance; nor do I think they believe that it is generally a good thing.

How is Connecticut like Texas (which has a bill pending to hide pension and health care liabilities for retired government workers and families)?
Connecticut has picked a fight with the independent board  (FASB/GASB) that tells state and local governments how to report their financial affairs.
Mary Williams Walsh, "Connecticut Takes Up Fight Over Accounting Rules," The New York Times, June 2, 2007 ---
Click Here
Jensen Comment
Funny thing is Andy Fastow said the same thing about accounting standards and auditors. If you're going to sell your bonds in the public capital markets, it seems that hiding debt from bond purchasers is not an especially good idea.

At issue is the immense amount of such undisclosed debt even when discounted back to a present value amount. It's the enormous magnitude that is the cause of the new laws designed to keep this debt a big secret.
Bob Jensen's threads on this controversial topic are at http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#Pensions

"Shocks Seen in New Math for Pensions," by Mary Williams Walsh, The New York Times, March 31, 2006 ---
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The board that writes accounting rules for American business is proposing a new method of reporting pension obligations that is likely to show that many companies have a lot more debt than was obvious before.

In some cases, particularly at old industrial companies like automakers, the newly disclosed obligations are likely to be so large that they will wipe out the net worth of the company.

The panel, the Financial Accounting Standards Board, said the new method, which it plans to issue today for public comment, would address a widespread complaint about the current pension accounting method: that it exposes shareholders and employees to billions of dollars in risks that they cannot easily see or evaluate. The new accounting rule would also apply to retirees' health plans and other benefits.

A member of the accounting board, George Batavick, said, "We took on this project because the current accounting standards just don't provide complete information about these obligations."

The board is moving ahead with the proposed pension changes even as Congress remains bogged down on much broader revisions of the law that governs company pension plans. In fact, Representative John A. Boehner, Republican of Ohio and the new House majority leader, who has been a driving force behind pension changes in Congress, said yesterday that he saw little chance of a finished bill before a deadline for corporate pension contributions in mid-April.

Congress is trying to tighten the rules that govern how much money companies are to set aside in advance to pay for benefits. The accounting board is working with a different set of rules that govern what companies tell investors about their retirement plans.

The new method proposed by the accounting board would require companies to take certain pension values they now report deep in the footnotes of their financial statements and move the information onto their balance sheets — where all their assets and liabilities are reflected. The pension values that now appear on corporate balance sheets are almost universally derided as of little use in understanding the status of a company's retirement plan.

Mr. Batavick of the accounting board said the new rule would also require companies to measure their pension funds' values on the same date they measure all their other corporate obligations. Companies now have delays as long as three months between the time they calculate their pension values and when they measure everything else. That can yield misleading results as market fluctuations change the values.

"Old industrial, old economy companies with heavily unionized work forces" would be affected most sharply by the new rule, said Janet Pegg, an accounting analyst with Bear, Stearns. A recent report by Ms. Pegg and other Bear, Stearns analysts found that the companies with the biggest balance-sheet changes were likely to include General Motors, Ford, Verizon, BellSouth and General Electric.

Using information in the footnotes of Ford's 2005 financial statements, Ms. Pegg said that if the new rule were already in effect, Ford's balance sheet would reflect about $20 billion more in obligations than it now does. The full recognition of health care promised to Ford's retirees accounts for most of the difference. Ford now reports a net worth of $14 billion. That would be wiped out under the new rule. Ford officials said they had not evaluated the effect of the new accounting rule and therefore could not comment.

Applying the same method to General Motors' balance sheet suggests that if the accounting rule had been in effect at the end of 2005, there would be a swing of about $37 billion. At the end of 2005, the company reported a net worth of $14.6 billion. A G.M. spokesman declined to comment, noting that the new accounting rule had not yet been issued.

Many complaints about the way obligations are now reported revolve around the practice of spreading pension figures over many years. Calculating pensions involves making many assumptions about the future, and at the end of every year there are differences between the assumptions and what actually happened. Actuaries keep track of these differences in a running balance, and incorporate them into pension calculations slowly.

That practice means that many companies' pension disclosures do not yet show the full impact of the bear market of 2000-3, because they are easing the losses onto their books a little at a time. The new accounting rule will force them to bring the pension values up to date immediately, and use the adjusted numbers on their balance sheets.

Not all companies would be adversely affected by the new rule. A small number might even see improvement in their balance sheets. One appears to be Berkshire Hathaway. Even though its pension fund has a shortfall of $501 million, adjusting the numbers on its balance sheet means reducing an even larger shortfall of $528 million that the company recognized at the end of 2005.

Berkshire Hathaway's pension plan differs from that of many other companies because it is invested in assets that tend to be less volatile. Its assumptions about investment returns are also lower, and it will not have to make a big adjustment for earlier-year losses when the accounting rule takes effect. Berkshire also looks less indebted than other companies because it does not have retiree medical plans.

Mr. Batavick said he did not know what kind of public comments to expect, but hoped to have a final standard completed by the third quarter of the year. Companies would then be expected to use it for their 2006 annual reports. The rule will also apply to nonprofit institutions like universities and museums, as well as privately held companies.

The rule would not have any effect on corporate profits, only on the balance sheets. The accounting board plans to make additional pension accounting changes after this one takes effect. Those are expected to affect the bottom line and could easily be more contentious.

First They Do
"Bill Requires Reporting Unfunded Federal Liabilities," AccountingWeb, April 12, 2006 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=102016

With state and local governments scrambling to meet the Government Accounting Standards Board’s (GASB) amended rules for reporting on postretirement benefits, and private and public companies getting ready for compliance with the Financial Accounting Standards Board’s (FASB) proposed statement on recording pension liabilities, a congressman from Indiana has introduced legislation that would require the federal government to meet a similar standard. The Truth in Accounting Act, sponsored by Rep. Chris Chocola (R-Ind) and co-sponsored by Reps. Jim Cooper (D-Tenn) and Mark Kirk (R – Ill), would require the federal government to accurately report the nation’s unfunded long-term liabilities, including Social Security and Medicare, a debt that amounts to $43 trillion dollars, during the next 75 years, Chocola says, according to wndu.com.

The U.S. Treasury Department is not currently required to file an annual report of these debts to Congress, wndu.com says.

“When I was in business, the federal government required our company to account for long-term liabilities using generally accepted accounting principles,” Chocola told the South Bend Tribune. “This bill would require the federal government to follow the same laws they require every public business in America to follow. If any company accounted for its business the way the government accounts, the business would be bankrupt and the executives would be thrown into jail.”

The legislation doesn’t propose solutions for the burgeoning liabilities, but it takes a crucial first step, according to Chocola, “by requiring the Treasury Department to begin reporting and tracking those liabilities according to net present value calculations and accrual accounting principles,” the Tribune reports.

“In order to solve our problems and prevent an impending fiscal crisis,” Chocola said, “we have to first identify where and how large the problem is.”

Chocola clearly sees a looming fiscal crisis. “Congress is the Levee Commission and the flood is coming,” he told the Tribune. “This [bill] is intended to sound the warning bell.”

To support his position, according to the Tribune, Chocola referred to an article written by David Walker, a Clinton appointee who serves as Comptroller General of the United States and head of the U.S. Government Accountability Office (GAO). Walker wrote that the government was on an “unsustainable path”.

Speaking to a British audience last month, Walker said that the U.S. is headed for a financial crisis unless it changes its course of racking up huge deficits, Reuters reported. Walker said some combination of reforming Social Security and Medicare spending, discretionary spending and possibly changes in tax policy would be required to get the deficits under control.

“I think it’s going to take 20-plus years before we are ultimately on a prudent and sustainable path,” Walker said, according to Reuters, partly because so many American consumers follow the government’s example. “Too many Americans are spending more than they take in and are running up debt at record rates.”

Now They Don't
"Bill Requires Reporting Unfunded Federal Liabilities," AccountingWeb, April 12, 2006 --- http://www.accountingweb.com/cgi-bin/item.cgi?id=102016

With state and local governments scrambling to meet the Government Accounting Standards Board’s (GASB) amended rules for reporting on postretirement benefits, and private and public companies getting ready for compliance with the Financial Accounting Standards Board’s (FASB) proposed statement on recording pension liabilities, a congressman from Indiana has introduced legislation that would require the federal government to meet a similar standard. The Truth in Accounting Act, sponsored by Rep. Chris Chocola (R-Ind) and co-sponsored by Reps. Jim Cooper (D-Tenn) and Mark Kirk (R – Ill), would require the federal government to accurately report the nation’s unfunded long-term liabilities, including Social Security and Medicare, a debt that amounts to $43 trillion dollars, during the next 75 years, Chocola says, according to wndu.com.

The U.S. Treasury Department is not currently required to file an annual report of these debts to Congress, wndu.com says.

“When I was in business, the federal government required our company to account for long-term liabilities using generally accepted accounting principles,” Chocola told the South Bend Tribune. “This bill would require the federal government to follow the same laws they require every public business in America to follow. If any company accounted for its business the way the government accounts, the business would be bankrupt and the executives would be thrown into jail.”

The legislation doesn’t propose solutions for the burgeoning liabilities, but it takes a crucial first step, according to Chocola, “by requiring the Treasury Department to begin reporting and tracking those liabilities according to net present value calculations and accrual accounting principles,” the Tribune reports.

“In order to solve our problems and prevent an impending fiscal crisis,” Chocola said, “we have to first identify where and how large the problem is.”

Chocola clearly sees a looming fiscal crisis. “Congress is the Levee Commission and the flood is coming,” he told the Tribune. “This [bill] is intended to sound the warning bell.”

To support his position, according to the Tribune, Chocola referred to an article written by David Walker, a Clinton appointee who serves as Comptroller General of the United States and head of the U.S. Government Accountability Office (GAO). Walker wrote that the government was on an “unsustainable path”.

Speaking to a British audience last month, Walker said that the U.S. is headed for a financial crisis unless it changes its course of racking up huge deficits, Reuters reported. Walker said some combination of reforming Social Security and Medicare spending, discretionary spending and possibly changes in tax policy would be required to get the deficits under control.

“I think it’s going to take 20-plus years before we are ultimately on a prudent and sustainable path,” Walker said, according to Reuters, partly because so many American consumers follow the government’s example. “Too many Americans are spending more than they take in and are running up debt at record rates.”

At issue is the immense amount of such debt even when discounted back to a present value amount.
Bob Jensen's threads on this controversial topic are at http://www.trinity.edu/rjensen//theory/00overview/theory01.htm#Pensions

Say goodbye to the kiddie tax loophole

From The Wall Street Journal Accounting Weekly Review on June 1, 2007