Ligand: Violating U.S. Accounting Standards and Concepts Report

Exclusively available on Available only on IvyPanda® Made by Human No AI

The Ligand Company violated U.S. accounting standards and concepts, specifically U.S. GAAP when it understated its sales returns to present a better financial picture of the company. The research focuses on the Ligand violations of U.S. consistency, comaparability, and fair presentation standards and concepts (Bragg, 2007). The research focuses on the criticism on PCAOB for being too stringent. The financial statements must display the fair presentation of the organization’s business activities.

International accounting standard 18 focuses on revenues. Revenue is income that is precipitates from the daily business activities of the company. Revenue is recorded when it is probable that future economic benefits will flow into the coffers of the company and the benefits can be measured (Bragg, 2007). Likewise, revenue represents the gross inflow of benefits from the daily business activities of the company. In this regard, sales return is a necessary accounting entry that reduces revenues to its net realizable.

Gross sales less sales returns produces net sales; net sales is the revenue that represents the gross inflow of benefits from the company’s daily business operations. Likewise, international accounting standards 1, preparation of financial statements, discusses the intricacies of recording business transactions, including when, how, and how much should be recorded in terms of sales returns (www.IASB.com).

Ligand failed to comply with the accounting standard and concept specially IAS 18 and IAS1. Ligand underestimated its sales return figures to show a fraudulent net revenue figure of only 2.5%. Ligand should present the real sales return figure which is higher.

The higher sales return figure would reduce net revenues; this true net revenue estate presents a less favorable picture of Ligand when compared to the fraudulent net revenue shown in the Ligand financial statements. Fazio should use realistic figures such as the forecast done by Fazio’s auditing staff shown to be from 13% to 20%. Consequently, Fazio should not issue a non qualified opinion (Moeller, 2008).

In response to the understatement of the sales returns, the external auditors should recommend an adjustment to the sales return figures from the erroneous 2.5% to the realistic figure; the realistic figure is from13% to 20%. Failure to comply with the audit recommendations would force the external auditors to avoid issuing a nonqualified opinion (Delaney &Whittington, 2010).

From its creation, the PCAOB had many criticisms from many affected sectors, especially the external auditing firm. There have been many complaints directed at the Public Company Accounting Oversight Board. One of the major criticisms is that the PCAOB’s issuance of AS2. This is a 150 page auditing standards that forces external auditors to metamorphose into a more conservative type of audit program when handling each audit client.

Another major complaint is that AS2 does not explain in detail how publicly listed companies establish a “fair” internal control system (Moeller 2008). Likewise, the PCAOB has forced external auditing firms to increase its audit expenses; the auditing firm must increase its audit time and audit program to ensure a better audit work as compared to the less stringent auditing program prevailing prior to the PCAOB and Sarbanes –Oxley Act.

The PCAOB introduced the stricter audit policies to prevent a repeat of the Enron, WorldCom, and other accounting scandals where the external auditors connived with their clients to present fraudulent financial statements. Many audit companies complained that PCAOB –prescribed auditing standards were too cumbersome and expensive (Daelen 2010).

The PCAOB should implement some measures to improve the efficiency as well as effectiveness as a Sarbanes Oxley Act –created auditing oversight body. The PCAOB should hold regular meetings with representatives from all affected sectors of society, especially the external auditors.

The PCAOB body should taper its stringent auditing policies to ensure the survival of the auditing firms. In addition, the PCAOB should openly receive suggestions from auditing firms and the client firms as basis for issuing future audit –related policies and procedures.

Briefly, the Ligand Company violated U.S. accounting standards and concepts, specifically U.S. GAAP by understating sales returns. The external auditor required adjustments to correct the fraudulent Ligand Company financial report. The PCAOB has been criticized for being too stringent on the auditing firms. Indeed, financial statements should present the fair presentation of the organization’s business activities.

References

Bragg, S. (2007) Wiley GAAP Policies and Procedures. New York, J Wiley & Sons Press.

Daelen, M. (2010) Risk Management and Corporate Governance. New York, Edward Press.

Delaney, P., Whittington, R., (2010) Wiley CPA Exam Review 2011: Auditing and Attestation. New York,J. Wiley & Sons Press.

Moeller, R. (2008) Sarbanes -Oxley Internal Controls. New York, J Wiley & Sons Press.

More related papers Related Essay Examples
Cite This paper
You're welcome to use this sample in your assignment. Be sure to cite it correctly

Reference

IvyPanda. (2018, July 19). Ligand: Violating U.S. Accounting Standards and Concepts. https://ivypanda.com/essays/ligand-pharmaceuticals/

Work Cited

"Ligand: Violating U.S. Accounting Standards and Concepts." IvyPanda, 19 July 2018, ivypanda.com/essays/ligand-pharmaceuticals/.

References

IvyPanda. (2018) 'Ligand: Violating U.S. Accounting Standards and Concepts'. 19 July.

References

IvyPanda. 2018. "Ligand: Violating U.S. Accounting Standards and Concepts." July 19, 2018. https://ivypanda.com/essays/ligand-pharmaceuticals/.

1. IvyPanda. "Ligand: Violating U.S. Accounting Standards and Concepts." July 19, 2018. https://ivypanda.com/essays/ligand-pharmaceuticals/.


Bibliography


IvyPanda. "Ligand: Violating U.S. Accounting Standards and Concepts." July 19, 2018. https://ivypanda.com/essays/ligand-pharmaceuticals/.

If, for any reason, you believe that this content should not be published on our website, please request its removal.
Updated:
This academic paper example has been carefully picked, checked and refined by our editorial team.
No AI was involved: only quilified experts contributed.
You are free to use it for the following purposes:
  • To find inspiration for your paper and overcome writer’s block
  • As a source of information (ensure proper referencing)
  • As a template for you assignment
Privacy Settings

IvyPanda uses cookies and similar technologies to enhance your experience, enabling functionalities such as:

  • Basic site functions
  • Ensuring secure, safe transactions
  • Secure account login
  • Remembering account, browser, and regional preferences
  • Remembering privacy and security settings
  • Analyzing site traffic and usage
  • Personalized search, content, and recommendations
  • Displaying relevant, targeted ads on and off IvyPanda

Please refer to IvyPanda's Cookies Policy and Privacy Policy for detailed information.

Required Cookies & Technologies
Always active

Certain technologies we use are essential for critical functions such as security and site integrity, account authentication, security and privacy preferences, internal site usage and maintenance data, and ensuring the site operates correctly for browsing and transactions.

Site Customization

Cookies and similar technologies are used to enhance your experience by:

  • Remembering general and regional preferences
  • Personalizing content, search, recommendations, and offers

Some functions, such as personalized recommendations, account preferences, or localization, may not work correctly without these technologies. For more details, please refer to IvyPanda's Cookies Policy.

Personalized Advertising

To enable personalized advertising (such as interest-based ads), we may share your data with our marketing and advertising partners using cookies and other technologies. These partners may have their own information collected about you. Turning off the personalized advertising setting won't stop you from seeing IvyPanda ads, but it may make the ads you see less relevant or more repetitive.

Personalized advertising may be considered a "sale" or "sharing" of the information under California and other state privacy laws, and you may have the right to opt out. Turning off personalized advertising allows you to exercise your right to opt out. Learn more in IvyPanda's Cookies Policy and Privacy Policy.

1 / 1