Former Assistant Professor of Accounting at Columbia Business School
What we cover
This course examines the generally accepted accounting principles (GAAP) underlying the financial statements and their implementation in practice. We put more emphasis on how to understand and evaluate the information (a user perspective), as opposed to how to prepare it (a bookkeeping perspective). In the context of IBS, we discuss the incentives, opportunities, constraints as well as possible detections of earnings management, and the implications of earnings management for different individuals (e.g., executives, investors), for the business as well as for the society. We also address the roles of accounting ethics when there are conflicts of interest among individuals, business, and society.
Why it matters
The quality of financial reporting affects the efficiency of capital allocation in the society. Recently, widely publicized cases of misleading financial statements shake the public's confidence in corporate financial reporting. When some managers manipulate the financial reporting process to gain personal benefits, it is at the cost of the investors, business as well as the society. It is therefore essential for managers to provide quality and transparent financial information for various decision-making purposes.
What students learn
Students learn the accounting framework with an understanding of key accounting assumptions, accounting process, and major financial statements. They learn to analyze the financial statements and supplemental information to assess the quality of financial reporting and identify potential earnings management. They also learn to understand the role of accounting rules, corporate governance, as well as regulators, among other things, in improving the quality and transparency of financial reporting.