a. Market to book ratio/Price to book ratio .................................................................................. 7
b. Earnings Multiples/Price Earnings Ratio ................................................................................... 9
c. Dividend Valuation/Dividend Discount Model ........................................................................ 10
d. Discounted Cash Flow ............................................................................................................. 12
a. Audit ....................................................................................................................................... 15
b. Audit Process .......................................................................................................................... 15
c. Assertions ............................................................................................................................... 16
d. Type of audits ......................................................................................................................... 17
e. Audit regulations .................................................................................................................... 17
f. Role of auditors ...................................................................................................................... 17
g. Type of auditors ...................................................................................................................... 19
h. Professionalism and Scepticism .............................................................................................. 21
i. Audit Failures .......................................................................................................................... 23
j. Future of Auditing................................................................................................................... 27
k. Why Big 4 audit firm domination may be a problem .............................................................. 28
l. Audit market reform: expected proposals from the EU .......................................................... 29
m. Joint auditors ....................................................................................................................... 29
a. Definition ................................................................................................................................ 30
b. The need for CG ...................................................................................................................... 30
c. Audit Committee .................................................................................................................... 31
d. How is it implemented + principles ......................................................................................... 31
e. Best practices + norms of peoples behaviour ......................................................................... 38
f. Importance of integrity ........................................................................................................... 39
g. Issues in governance and failures ........................................................................................... 43
h. Internal control + enhanced role of people in charge of governance and monitoring
authorities .................................................................................................................................... 43
1
,a. How it happens ....................................................................................................................... 43
b. Aftermath of scandals ............................................................................................................. 46
c. History of financial scandals and corporate collapses ............................................................. 47
d. How to prevent scandals ........................................................................................................ 47
e. Use knowledge of governance and audit to dissect the case .................................................. 49
a. Benefits & How it works ......................................................................................................... 51
b. Issues ...................................................................................................................................... 54
c. Solutions ................................................................................................................................. 57
a. Revenue recognition and earnings management.................................................................... 60
a. current earnings vs current cash flow in predicting future cash flow ...................................... 62
2
,3
, 1. Why:
- Stock valuation is a method to determine the intrinsic value of a stock, letting an
investor to determine whether the stock is over or under valued compared to its
current market price.
- Valuing private companies for:
a. Acquisitions and takeovers
b. Investment in private entity
c. Financial reporting – fair value measurement
d. Debt Financing
e. IPOs
- Equity valuation methods differ in technique, but they share the same objective—to
estimate the PV of these payoffs to shareholders. In using these types of techniques,
however, the analyst is taking a shortcut with the ultimate goal of forecasting a
company’s future prospects.
2. How:
- The valuation process has five steps:
a. Understanding the business.
b. Forecasting company performance.
c. Selecting the appropriate valuation model.
d. Converting forecasts to a valuation.
e. Applying the analytical results in the form of recommendations and
conclusions.
4
b. Earnings Multiples/Price Earnings Ratio ................................................................................... 9
c. Dividend Valuation/Dividend Discount Model ........................................................................ 10
d. Discounted Cash Flow ............................................................................................................. 12
a. Audit ....................................................................................................................................... 15
b. Audit Process .......................................................................................................................... 15
c. Assertions ............................................................................................................................... 16
d. Type of audits ......................................................................................................................... 17
e. Audit regulations .................................................................................................................... 17
f. Role of auditors ...................................................................................................................... 17
g. Type of auditors ...................................................................................................................... 19
h. Professionalism and Scepticism .............................................................................................. 21
i. Audit Failures .......................................................................................................................... 23
j. Future of Auditing................................................................................................................... 27
k. Why Big 4 audit firm domination may be a problem .............................................................. 28
l. Audit market reform: expected proposals from the EU .......................................................... 29
m. Joint auditors ....................................................................................................................... 29
a. Definition ................................................................................................................................ 30
b. The need for CG ...................................................................................................................... 30
c. Audit Committee .................................................................................................................... 31
d. How is it implemented + principles ......................................................................................... 31
e. Best practices + norms of peoples behaviour ......................................................................... 38
f. Importance of integrity ........................................................................................................... 39
g. Issues in governance and failures ........................................................................................... 43
h. Internal control + enhanced role of people in charge of governance and monitoring
authorities .................................................................................................................................... 43
1
,a. How it happens ....................................................................................................................... 43
b. Aftermath of scandals ............................................................................................................. 46
c. History of financial scandals and corporate collapses ............................................................. 47
d. How to prevent scandals ........................................................................................................ 47
e. Use knowledge of governance and audit to dissect the case .................................................. 49
a. Benefits & How it works ......................................................................................................... 51
b. Issues ...................................................................................................................................... 54
c. Solutions ................................................................................................................................. 57
a. Revenue recognition and earnings management.................................................................... 60
a. current earnings vs current cash flow in predicting future cash flow ...................................... 62
2
,3
, 1. Why:
- Stock valuation is a method to determine the intrinsic value of a stock, letting an
investor to determine whether the stock is over or under valued compared to its
current market price.
- Valuing private companies for:
a. Acquisitions and takeovers
b. Investment in private entity
c. Financial reporting – fair value measurement
d. Debt Financing
e. IPOs
- Equity valuation methods differ in technique, but they share the same objective—to
estimate the PV of these payoffs to shareholders. In using these types of techniques,
however, the analyst is taking a shortcut with the ultimate goal of forecasting a
company’s future prospects.
2. How:
- The valuation process has five steps:
a. Understanding the business.
b. Forecasting company performance.
c. Selecting the appropriate valuation model.
d. Converting forecasts to a valuation.
e. Applying the analytical results in the form of recommendations and
conclusions.
4
