Ethical Issue 1-1 The advance of directors of Xiaping Trading Company is meeting to discuss the past stratums results forrader releasing pecuniary statements to the bank. The discussion includes this exchange:
Wai Lee, company proprietor: This has non been a good year! Revenue is down(p) and expenses are way up. If we are not careful, we will penning a loss for the third year in a row. I can temporarily transfer some nation that I own into the companys name, and that will beef up our rest period sheet. Brent, can you shave $500,000 from expenses? Then we can probably endure the bank loan that we need.
Brent Ray, company chief accountant: Wai Lee, you are asking too much. Generally accepted report principles are designed to keep this sort of thing from happening.
Requirements
1.What is the inherent ethical issue in this situation?
2.How do the devil suggestions of the company owner differ?
Ethical Issue 1-1
Req. 1
The profound ethical issue in this situation is letting the financial statements tell the truth about the companys execution of instrument and financial position.
There are two specific items to address. starting of all, transferring the land violates GAAP because it is a sham transaction that is not at arms length. The second issue is that of neaten expenses. If by shaving is simply meant reducing expenses, this is not a problem. If it means reclassifying expenses in an effort to boost net income, it is nonsensical and Janus-faced.
Req. 2
The purpose to transfer assets to the company in the prior year would be a sham, and thus it would be dishonest and unethical. The proposal to shave expenses, meaning reclassifying expenses, would violate the rules of GAAP, thus it would be dishonest and unethical.If you want to get a full essay, order it on our website: Ordercustompaper.com
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