Josie, an accounting supervisor in Monk & Sons Realty, instructs Maria, her employee, to make certain accounting entries in the company's books that will increase revenue. Maria researches the matter, confirming her concern that these entries would overstate revenue, and informs Josie that recogniz...
1. Sarah, the controller of a large beverage supplier, supervises two employees. Her boss, Vladimir, instructs her to increase the company's inventory balance for an amount that is material to the financial statements by crediting several small "miscellaneous" expense accounts. She does not understand why he wants her to make these entries but i mmediately directs one of her staff to make them because she has been instructed to do so. Which of the following statements best describes Sarah's actions? 2. Sarah failed to evaluate a potential ethical issue. 3. SarahfailedtoreferthemattertotheAICPAethicshotline. 4. Sarah failed to ensure that her staff was competent to make the entries. 5. Sarah failed to consider the rules of other regulators. Step-by-Step explanation The correct answer is choice 2. Sarah failed to evaluate a potential ethical issue. Description of Sarah's actions. Ethical issues in the above case. Ethics refer to the moral principles governing the behavior of individuals or the conduct of a business.It deals with what is g ood and bad. Ethics majorly focuses on the universal fairness of individual's or business' actions as well as trying to check on whether these individual's actions can be termed as responsible or not.The presence of ethics in every business will promote in tegrity or honesty among its employees. Further, it will lead to gain of some trust from various key or major business stakeholders such as shareholders ,customers and investors. In the above case scenario, there is no ethics,this has been depicted by the actions of those charged with governance of the company.For instance, Sarah just got instructed by her boss Vladimir to have the inventory balances of the company increased. She (Sarah) did not understand the reason behind this increase and went ah ead to instruct her staff to effect the increase.This increase was intended to falsify the financial statements of the company thereby resulting to the statements not showing a true and fair view of the company's performance or affairs.This might be inten ded to deceive the company's stakeholders on the company's performance. This is not ethical as it goes against the financial reporting standards as well as regulatory laws governing the preparation and presentation of such statements. Sarah, would have considered the ethical issues involved and and discussed the same with her boss, Mr Vladimir, before effecting the changes. She therefore disregarded the ethical issues that might have resulted from such actions which is not good for th e operation of the company. 6. Josie, an accounting supervisor in Monk & Sons Realty, instructs Maria, her employ ee, to make certain accounting entries in the company's books that will increase revenue. Maria researches the matter, confirming her concern that these entries would overstate revenue, and informs Josie that recognizing revenue in this manner would be premature and not consistent with generally accepted accounting principles (GAAP) but Josie disagrees and insists that Maria record the entries. The amount of revenue is material to Monk's fina ncial statements. According to the AICPA rules, what should Maria do first? 7. Resign her position quietly. 8. Report the matter to the senior partner in the firm. 9. Take out a professional liability policy. 10. Discuss her concerns with Josie's boss. Answer: The correct answer is: Report the matter to the senior partner in the firm. Step-by-Step explanation The correct answer is to report the matter to the senior partner in the firm.In accounting,an item is considered a material if it can reasonably be expected to influence economic decision of financial statement users.In other words,the item inclusion or omission can mislead decision makers.According to AICPA,if the amount of revenue is material to Monk's financial statements,she should report the matter to the senior partner in the firm first before discussing her concerns with management(Josie's boss). 1. The AICPA Code of Professional Conduct includes the following sections: 2. Preface, rules, and interpretations applicable to members in tax practice and members in business. 3. Preface, rules, and interpretations applicable to members in public practice and members n business. 4. Preface, rules, and interpretations applicable to members in tax practice and members in audit practice. 5. Preface, rules, and interpretations applicable to members in audit practice and members in business . 1. Which of the following statements best describes how the International Federation of Accountants' (IFAC's) rules and standards impact the U.S. accounting profession? 2. Individual CPAs practicing in the United States are required to stay aware of IFAC rules and standards and adopt them immediately. 3. StateboardsofaccountancyarerequiredtoadopttheIFAC'sruleswithin90daysoftheIFAC rule change. 4. As a member body of IFAC, the AICPA is required to change its bylaws whenever the IFAC changes its rules. 5. TheAICPAisrequiredtoadoptethicsandotherprofessionalstandardsthatareatleastas restrictive as IFAC's. Answer: 5 . Step-by-Step explanation The answer is as simple as: The AICPA (American Institute of Certified Public Accountants) is required to adopt ethics and other profession al standards that are at least as restrictive as IFAC's (International Federation of Accountants) * This is a simple as saying that there should be a standard that is set. And is to be followed by all. Giving this a guide for accountants. This will serve as a standard foundation for everyone. Let me give you a run -through using this references: https://www.aicpa.org/interestareas/professionalethics/community/aicpa -conceptual -
framework.html 6. Which of the following phrases is used by the Code of Professional Conduct to describe integrity? 7. Candid, within the constraints of client confidentiality. 8. Forcefuladvocateoftheclient'sposition. 9. Valued business advisor to the client. 10. Willing to subordinate judgment to achieve a proper outcome. Answer: 7 . Step-by-Step explanation 7. Candid, within the constraints of client confidentiality. The Code of Professional Conduct defines integrity as an act of being honest and candid within the constraints of client confidentiality. In the definition, an individual should never use the level of service and public trust for personal gain. This means individuals should maintain and broaden the public confidence and perform their professional responsibilities with the highest sense of integrity.
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