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Quality of
financial reporting
— Is the company clearly and accurately
disclosing the compensation, benefits, and perquisites of executives?
— Has the company selected appropriate
accounting policies? Why does management use a particular accounting method
(e.g., revenue recognition, amortization method, and cost deferral) in light
of different policies used by the company’s competitors? Has the company
consistently and properly applied the appropriate accounting policies? Are
the company’s overall accounting policies aggressive or conservative?
— Did the company consult with the SEC
regarding any accounting matters during the past year?
— How does management assess the
significant operating, market, and credit risks that are discussed in the
annual report?
—
Why does the
company file financial reports with the SEC on Form 10-KSB (which requires
only a balance sheet for the current year and income statements, statements
of comprehensive income, and cash flow statements for the most recent two
years) rather than on Form 10-K (which requires balance sheets for the last
two years and income statements, statements of comprehensive income, and cash
flow statements for the last three years)?
— Were any accounting policies or
estimates changed this year? To what extent are estimates by management part
of the financial reporting process? Which estimates are considered critical?
How does management determine when and if a change in estimate is
appropriate?
— Why did the company change its method
of accounting for ___? Why is this method better than the former one? Did the
external auditors provide the company with a preferabilty
letter?
— What is the quality of the company’s
earnings (e.g., unusual or non-recurring sources of income that are not
separately disclosed)?
Recent accounting
changes
— Has the company determined the impact
of the Medicare Drug Subsidy?
— What is the funded status of the
company’s pension plans? What does the company intend to do about any
over-funded or underfunded plans? Has management
considered any changes to those pension plans?
— What is the assumed long-term rate of
return on pension plan assets for accounting purposes? How did management
(and the audit committee and the auditors) conclude that the assumed
long-term rate of return is a realistic long-term expectation?
— Does the company have any variable
interest entities (VIEs) or special purpose
entities (SPEs), or other "off-balance sheet
financing" arrangements? What transactions does the company enter with VIEs or SPEs and why? Are the SPEs consolidated? Are there any related parties involved
with any such entities or arrangements? How did the company determine that it
did not need to consolidate any such special purpose entity?
— Is the company using special purpose
entities for its real estate assets?
— Did the company provide any financial
guarantees? What impact did the issuance of FASB Interpretation No. 45, Guarantor’s Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, have on the company?
— What were the major costs included in
the company’s restructuring charge? When is the plan expected to be
completed? What are the estimated efficiencies and savings expected in future
periods? Have the estimated efficiencies and savings from the restructuring
been compared to actual results? What was the impact on the company’s
restructuring accrual due to the issuance of FASB Statement 146, Accounting
for Costs Associated with Exit or Disposal Activities? What
impact will Statement 146 have on restructurings in the future?
— What incentives are used to ensure
each operating segment is maximizing shareholder returns? Did the company
change any of its operating segments as a result of the goodwill impairment
test required by FASB Statement 142, Goodwill and Other Intangible Assets?
How did that change affect the goodwill impairment loss?
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