What aspect of the business strategy of ABC Learning resulted in increased business risk for the company?
ABC learning is one of the biggest company in AAustralia in provided an education to an early child. This company founded by Groves in Brisbane, Queensland in 1986. ABC learning support and make a real difference to the lives of their families by providing the exciting facilities and the latest equipment to support children in a safe, fun, exciting and nurturing environment.  With that good education and caring to child and also experience's of the staff, make this company growing and expanded so fast from year to year. Now ABC has branch in almost every city in Australia. Not only in Australia but ABC learning also go international to Europe and America. With that fast developing, makes ABC learning became Australian's leading operator of childcare centers.
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When ABC learning listed on stock exchange in march 2001, it was tiny operation with the market capitalization of just $25 million Australian dollar, with the many investors came, it's make the share issue of the company increased many times in 2002 until 2005. In march 2006 the ABC learning reach AUD$2.5 billion capitalization, before ABC learning claim collapsed in the half year ending December 31, 2007. With the detailed financial statements from the failed child-care operator were delivered on February 19 2008. It the first time a financial statement show disaster and make shareholder and investor in firing lines. This statement has wiped out claim to having ever made a profit. 
The strategy had been used by ABC learning is trying to expanding the company by develop many centers around the world and aggressive acquisition strategy, with that strategy ABC learning hope can meet the target in 2007. From this strategy board expect to get high return or high income but in other side there is a high risk with this strategy, in other words if they failed to get income to cover their expenses then the company can collapses or bankruptcy.
The aggressive acquisition strategy and the dominant CEO-groves to expand company rapidly is the important reason of failing ABC learning company. All income it used for expansion and growing ABC learning centers around the world. The money being used to fund the company's aggressive acquisition strategy. ABC learning is looking to growth elsewhere, it's seen from purchased made by groves of the third-largest US operator of childcare centers, Learning centers in United States.
As the Dr. Phillip rose (head of accounting at western Sydney university said that ABC learning problem is same case as One tel and HIH company collapsed.  Which means there is a poor strategy by the board and lack of independence decision making by managers. Agency theories seems to be used by ABC learning company. Agency theory means the remaining board become independent from the managers and principal delegacy an authority decision to an agent, one of this theory problem is risk aversion-high risk high return come up. 
What are the intangibles assets? How did valuation of intangible assets pose a problem for ABC learning?
Intangible assets is a non-current asset. Intangible asset is an asset that usually does not have a physical substance but it expected to provide future benefits to the entity. Like property, plant, and equipment. Intangibles are recorded initially at cost or other reliable measure. The examples are pattern, copyrights, franchise, and secret processes.
As defined in IAS 38/AASB 138 intangible assets as an identifiable non-monetary assets without physical substance.  Their future benefits are measured by a fixed number of dollar receivable. They are usually held for use in the production of goods and services, administrative, and for rental to others. Account receivable is not an intangible assets because they are monetary in nature.
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Some intangibles such as patents, trademarks, brand names, franchise, licenses, copyright are often called identifiable intangibles. In other side if any others assets cannot be separated from the entity, they are regarded as unidentifiable assets and referred to as goodwill. There are three types assets which are separately acquired intangibles, internally generated intangibles, and intangibles subsequent to initial recognition.
There are a big problem for ABC learning company because they does not mention the goodwill or intangible assets that exist in their financial statemant, the accountants are creating a dangerous information gap which is the value can changes sometimes, and the worst thing is this assets clearly not reflected in their financial statements and make shareholder does not know about the real asset.
Intangibles assets also a hard to measure. We can not really measure or know how much value that intangibles got, with this situation ABC learning try to raise their share value with increase the asset with intangible asset. For me they try to manipulation an asset and construct a fake transaction for their purpose.
Valuation professional will be quick to counter that their work capture the essence of intangible through their projection of the income statement, that while the balance sheet may not describe intangibles, their effect is taken into account in the income statement. This happens because intangibles are not capitalized, they are expensed, many intangible cost of an organization are embedded rather than COGS, and also lack of information of intangibles cost side of business limits the ability to predict the future.
Â How might fundamental changing from bright line rules to principal accounting rules help prevent case like ABC like fiasco? And what are the dangers of removing "bright line rules"?
In bright line rules it allow an auditor to do manipulation in financial statement and balance sheet. An auditor also has more room to do a creative accounting without any strict law on it. There is no broad guidelines on preparing financial statement. This rules also more complex than another rules.Â
This has made standards longer and more complex, and has led to arbitrary criteria for accounting treatments that allow companies to structure transactions to circumvent unfavorable reporting. In addition, the quest for bright-line accounting rules has shifted the goal of professional judgment from consideration of the best accounting treatment to concern for parsing the letter of the rule.
In other side principal accounting is the recommended from International accounting standard system. in this principal there is a strict rules for auditor to make or preparing financial statement. it also has a broad guidlines that an auditor have to obey and follows. this principal also related to the conceptual framework. It also more regulated than other rules of accounting.Â In addition, principles-based accounting standards allow accountants to apply professional judgment in assessing the substance of a transaction. 
Principal based accounting can help prevent a case or problem like ABC company because there is more reliable, relevant, and comparable on preparing a financial statement. better than bright-line rules that not reliable and more complex on preparing financial statement and this rules is usually used for shifting goals of company. Principal based accounting also measure all financial instrument at fair value. The information using principal based accounting also more usefulness for decision makers than information using bright line system. The use of principles-based accounting standards may provide accounting statements that more accurately reflect a company's actual performance and moreÂ transparencyÂ also reduce a manipulation rather than bright line system.
As we know there is no guidance on bright line rules, numerous measures of fair value are potentially justifiable: the asking price, the bid price, or the average of the bid and ask prices. Thus, a rule was added to delineate exactly how fair value should be determined. So, a principle requiring financial instruments to be measured at fair value became a detailed rule with complex stipulations and exceptions that allow corporations to structure contracts to achieve favorable reporting.
There are many argument with the bright-line system. Many company in these days have a credit crisis, with this system, auditors can hide that crisis in the financial statement so the company can still go on track.
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The dangers of removing bright-line method is there are a little room for auditors and preparers for doing creative accounting in the financial statement and allowed them to used more judgment in the financial statement. And in fact there will be many company will collapses with the removing bright line system.
What is the relevant agency cost that lenders face in this situation? What mechanism could e lenders have enforced to minimize the agency cost arising here?
Agency cost is concept of economic that related with cost incurred by organization and also related with a problem divergent management, shareholder purpose and information. The relevant agency cost that lenders face is monitoring and Bonding.
Monitoring is a management behaviors through auditing financial statements.  So management has a more power on agency cost with doing audit in financial statements, with this situation monitoring spends a big audit fees.
Bonding is management behavior is aligned with shareholders expectation by preparation on financial statements.  There are also high accounting expenses with this work. There are residual loss because it Cost too much to remove all opportunistic behavior.
Agency cost also can arise because the management opportunistically when selecting accounting methods, management can choose the method that can give them more benefit on the agency cost.
The lenders can minimalism agency cost with using accounting information from everywhere with that lenders can try to reduce agency cost included monitoring and bonding, accounting information can lenders get from comparing the company with the others company or with get some advices from independent auditors based on financial statement company.
Agency cost can be reduced with the presence of large shareholder. With the large shareholder in the company and voting right significantly, the shareholder can influence the decision making in the firm. In other words a large shareholder have a greater influences to increase firm value through monitoring, in conclusion agency cost will reduce and firm value will be increased.
What could be the reason for divergent opinions of auditors? What are the recommendations of clerp 9 to promote auditor independence?
Yes, there are a divergent opinion from current auditor from Ernst & Young's Brian Long and previous auditor from Pitcher Partners, who were happy to endorse the interpretation provided by the company's management. There are different view from each auditor about financial statement of ABC learning.
Which is pitcher partners auditor feels OK about payments from developers that subsidized loss making centers and hid the fact that ultimately a quarter of them were losing money hand over fist were included as normal revenue, hiding that the government's child care largesse was no EI Dorado for ABC learning shareholder along with valuation on billion of dollars worth now discredited intangible assets that made up most of ABC balance sheet.  And they are not describes it in financial statement and make a shareholder and investment think the company is in safe or good position.
The different view come from Ernst & Young's Brian Long, he look to more generated a more accurate picture of ABC Learning perilous position before the company's collapses. Brian long try to make a financial statement more transparent for shareholder and investment so they know in what position ABC learning company stand so more usefulness for them to make decision for the future company.
In conclusion there are no fault from current and previous auditors, there only different opinion about the financial statement, which Ernst & Young Brian Long correctly diagnosed what was ultimately a fatal condition for ABC learning.
The recommendation from clerp 9 that make an auditor independent are there are non-audit consultancy income for auditors has been limited and must clearly disclosed, oversight auditors has been strengthened through the Financial Reporting Council, there are also rotation audit partner rotation every 5-7 years. And also former auditor are prohibited from taking employment in their former clients for 2 years.