Selecting Reporting Procedures The president of Vainway Company thinks that the manner in which the company is currently recording certain of its assets is inconsistent with common logic and forces it to misrepresent the total amount of assets it actually holds. The president has already talked with the financial accountants in the company and with the external CPAs who do the annual audit for Vainway, but the president’s suggestions have been rebuffed.

a. The financial statements ultimately are the responsibility of corporate management. Does this mean the president can use the methods he wants anyway?

b. What authoritative bodies are charged with determining appropriate accounting standards?

c. What factors might assure the president that the accountants are knowledgeable about currently acceptable accounting standards?

d. As a potential investor in Vainway, who would you prefer had the final say in the accounting methods to be used in preparing the company’s financial statements: the president, who is most knowledgeable about the company, or the auditors, who purport to be independent? Why?