Part I:
The new employees will be doing their first audits of the 2008 financial statements. In 2008, many businesses lost asset value as a result of a decline in market activity and asset value. A discussion arose in the financial and accounting community regarding mark to market or fair value accounting. The auditors need to have an understanding of what this means and how they should evaluate the assets of a business.
Discuss the following:
- Define and explain fair value accounting and historical accounting.
- Compare fair value accounting and historical accounting to each other as well as their impact on the balance sheet.
- Give your opinion about using fair value accounting in a down market.
Part II:
In the fall of 2008, the United States suffered massive corporate failures causing a financial meltdown. These corporate failures had a shock-wave effect on the banking industry, U.S. financial giants, and U.S. corporations that quickly spread around the globe. The banking, financial, and, eventually, U.S. automotive industry asked the government for help. The United States responded to the financial and banking industries very quickly with the Troubled Asset Relief Program (TARP). The use of the resulting bailout money was amazing. The questions and blame surrounding 2008 economic failure, as well as the congressional relief, will be discussed for years.
Consider the history of regulations in the United States and the probability of new regulations on the financial markets resulting from the 2008 economic collapse. Answer the following questions:
What do you think are the 2 main causes of the 2008 economic collapse and why? Support your opinion with facts.
What might some new regulations be, and what would be the purpose of the regulations?
Do you think new regulations are needed? Why or why not?