Belot Enterprises
Case 2.8
1. David Robinson’s suggested compromise is to require Belot to increase the June 30th balances of the allowance for bad debts and inventory obsolescence to more normal levels, while allowing the company to use the “precise point estimates” for the other three discretionary accruals. It is appropriate because it will reduce the year over year increase in Belot’s operating income for the just-completed quarter from 140 percent to 103 percent just enough to keep Allen happy.
2. I do believe Crabtree is a man of integrity but for this particular case the fact that he tried to save Belot, he did anything in his power to do and make Allen happy. David Robinson is a man of integrity, he was just in the middle of all this so he had to comprise with both sides.
3. To determine whether: Accrued liabilities represent all obligations for resources and services acquired through the balance sheet date and have been properly recorded.
Accrued liabilities are properly described and classified and adequate disclosures with respect to these amounts have been made.
No it is not permissible to overstate period-ending expense accruals to make financial statements more conservative because that is attempt of fraud.
4. The objective of a review of interim financial information is to provide the accountant, based on applying his or her knowledge of financial reporting practices to significant accounting matters of which he or she becomes aware through inquiries and analytical procedures, with a basis for reporting whether material modifications should be made for such information to conform with generally accepted accounting principles. The objective of a review of interim financial information differs significantly from the objective of an audit of financial statements in accordance with generally accepted auditing standards. The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole.
1. David Robinson’s suggested compromise is to require Belot to increase the June 30th balances of the allowance for bad debts and inventory obsolescence to more normal levels, while allowing the company to use the “precise point estimates” for the other three discretionary accruals. It is appropriate because it will reduce the year over year increase in Belot’s operating income for the just-completed quarter from 140 percent to 103 percent just enough to keep Allen happy.
2. I do believe Crabtree is a man of integrity but for this particular case the fact that he tried to save Belot, he did anything in his power to do and make Allen happy. David Robinson is a man of integrity, he was just in the middle of all this so he had to comprise with both sides.
3. To determine whether: Accrued liabilities represent all obligations for resources and services acquired through the balance sheet date and have been properly recorded.
Accrued liabilities are properly described and classified and adequate disclosures with respect to these amounts have been made.
No it is not permissible to overstate period-ending expense accruals to make financial statements more conservative because that is attempt of fraud.
4. The objective of a review of interim financial information is to provide the accountant, based on applying his or her knowledge of financial reporting practices to significant accounting matters of which he or she becomes aware through inquiries and analytical procedures, with a basis for reporting whether material modifications should be made for such information to conform with generally accepted accounting principles. The objective of a review of interim financial information differs significantly from the objective of an audit of financial statements in accordance with generally accepted auditing standards. The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole.