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Literature review of ethics in accounting
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If Hanks Snow convinced Alice Li to record the short term bank loan of $10,000 dollars as construction revenue instead of a loan it would significantly change the year-end income statement and the year-end balance sheet. It would cause the income state to state that there was net income for the year instead of a net-loss. It would also affect the year-end balance sheet by adding more cash to the balance sheet. This would affect the creditors of the company because it would not have paid the right amount of dividends to the creditors, making it a retained profit. If the company recorded this as revenue instead of a loan they would be going against the IMA standards of ethics of competence, integrity and credibility. He's breaking competence
Company Overview – Caterpillar Tractor Co. was founded in 1925 and was the product of a merger between The Holt Manufacturing Company, owned by BBB HHH, and C.L Best Tractor Co., owned by DDD BBB. The company had a great demand in WWI and this lead to the first foreign operation of many to come in the future.
Andrea may decide not to inform the limited partners about the misrepresentation of Skyline Views’s financial statements; to avoid conflict, this decision permits Ed to deceive the company and limited partners. In addition, by deciding not to inform the limited partners of Ed’s deceit, Andrea would be disregarding the American Institute of Certified Public Accountants Code of Professional Conduct in her being unreliable, dishonest and deceitful. Andrea has the responsibility of protecting her client, which involves encouraging the correction of financial statements in order to prevent suspicion during audits that could lead to fines and imprisonment. Andrea’s second option is to inform the limited partners about how misrepresentations of Skyline Views’s financial statements are permitting Ed to claim a higher management fee; this decision will fulfill her due diligence obligation to the limited partners while maintaining her integrity as a certified public accountant in supporting the American Institute of Certified Public Accountants Code of Professional Conduct.
The Commissioner of Internal Revenue (Commissioner) argued that Jim Turin & Sons, Inc. should have used the accrual method of accounting. By using the accrual method of accounting “you generally report income in the year earned and deduct or capitalize expenses in the year incurred. The purpose of an accrual method of accounting is to match income and expenses in the correct year.” (IRS, 2017).
Based on the textbook and my understanding, whenever there are negotiations between a procurer and a supplier regarding a competitive bidding, the first thing that might be favored is the scope of the project, meaning both will sit down and discuss the entire project prior the work begins. Meanwhile, during the negotiations, evaluation criteria should be clear, and stated and defined. As the evaluation is based on the criteria stated and the procurer can request or ask the supplier’s opinions on certain specifications and where things can be improved.
The Faith Mountain Company has experienced a great deal of success since opening in 1977. What Cheri and Martin Woodard began as a local store that sold herbs, related products, and antiques has slowly evolved into a major mail-order catalog company and retail store that develops, manufactures, and markets high-quality gifts, apparel, and home accessories. In 1991, Faith Mountain was still a relatively small company with less than 50 employees. However, sales have been steadily increasing for Faith Mountain, as they went from about $1.2 million in sales in 1987 to just over $5 million in 1991. In 1991 The Faith Mountain Company set for itself the overall goal of $25 million in annual sales by 1995, with $10 million coming from sales from the Faith Mountain catalog, $5 million from the retail division, and $10 million from the acquisition and development of another catalog company. Reaching these goals will have implications in all areas of operation, including expansion, human resources, marketing, and finance.
Although the plant accountant knew it was wrong to charge motors to operating expenditures, the accountant bowed to the pressure to do it anyway. The accountant violated the AICPA code of conduct, especially regarding serving the public interest. There were also issues with honesty and integrity.
Proper revenue recognition is important in because it has a direct impact on quarterly income statements, incentive calculations, investor confidence, and perception of an organizations financial health. The scandals at Enron and WorldCom illustrate how important properly recognize revenue is to the financial integrity of a company and how abuse can be extremely dangerous. (Labaton, 2006) To maintain consistency across organizations, the Securities and Exchange Commission (SEC) relies on the standards published by the Financial Accounting Standards Board (FASB) to establish the guidelines for revenue recognition. (FASB, 2011)
Mr. George Dodge, Clarkson Lumber Company is doing well but there is the issue of whether or not there is too high a risk in granting the request for the $750,000 line of credit. There are many supporting strong points but it also has some problems to work out. This is a company that has many good characteristics and looks promising but needs the extra money to pay off loans, inventory, and supplies. I recommend this company to receive the line of credit.
Introduction Today, when we hear the slogans "better farming, better food," or "proud to be farmer owned" one company comes to mind, Farmland Industries. We may think of this Fortune 500 company as a leading agricultural powerhouse, which it is, however, it was not always that way. Background Farmland Industries Inc. was founded by Howard A. Cowden, who was born and raised in Southwestern Missouri. Cowden started young in the cooperative business by working for the Missouri Farmers Association (MFA). However in October of 1927, he had resigned from the position of secretary for the MFA and started out on his own.
Enron’s Case of fraudulent transactions with the banking firm of Merill Lynch proves to be a perfect example of how loans are used to boost sales while in fact they’re technically not sales. In 2004 the “Nigerian barge” transaction ensued with Enron selling electricity-generating power barges to Merill Lynch. A huge sale as the company executives recorded it but it turns out it was actually a loan rather than a sale and that Enron did not actually earned from the transaction thus the investigations by the Securities and Exchange Commission in 2004. Perhaps the big question to be answered in this essay is, why is the transaction considered a loan rather than a sale? And if it were a loan, how would it affect the company’s financial statements?
(Potential $loss if reduce price = 94962.yr but losing market would be a bigger problem.)
There are many highly publicized scandals about corporations getting caught using unethical and illegal accounting practices. Whether a whistle blower who is an insider with knowledge of illegal goings on at their company, a news reporter covering a story about a company ?? or an audit that might uncover financial irregularities noticing a company that is not using the generally accepted accounting practices (GAAP), a company not using the accounting standards set forth by governing oversight committees is bound to unravel.
As per usual methods of accounting large firms typically use the accrual basis of accounting. This method measures the success and position of a company by recognizing the economic situation of a company regardless of when transactions occur. The procedure requires that all revenues be accounted for the exact date they have been earned. Following the correct GAAP accounting principles the amount received should be credited to the revenue account and the debit should appear on the cash received or accounts receivable section. The accrual basis of accounting allows the current cash inflows and outflows to be combined with future expected cash inflows and outflows, it provides a clear accurate picture of companies financial condition. Mike is requiring the employee to lie on the records to make his sales revenue appear better for the previous year however the premium doesn’t begin until the 5th of January the following year. The amount received in the year should be credited in the unearned service account, as it is an unearned liability, the cash should be debited to the cash account. The biggest issue with this unethical decision is the fact that by increasing the assets received for the previous year is that in essence the book value will appear to be higher than it actually is, in return for Mikes sales revenue looking more appealing. The income statement will be changed, as net income will appear higher than if the GAAP method was employed and net sales revenue will appear greater despite the policy not beginning until the following year. . The deferred amount would effect the balance sheet because liabilities will be effected the following year with cash not appearing on the income statement for the correct year and however the...
Manipulation, falsification (forgery), or alteration of accounting records or documents from which the financial statements are prepared.
The current circumstances have made us re-think about the governance of our company. To resolve certain issues like spread of our businesses, incompetent management, improper structure and high attrition rate has been addressed here. The strategic options evaluated are Divesting from some of the businesses, Re structuring the management by giving generalised top management or using specialized management. The options are evaluated on the basis of cash position, future projection, Repute preservation and efficient functioning of management. On the basis of these, I recommend to divest from irrelevant and non-performing businesses. This will ensure company’s smooth running and sustained profitability.