Financial Accounting Theory and Analysis” Text and Case: 1-2
Financial Accounting Theory and Analysis” Text and Cases
Case 1-2 Accounting Ethics
a. What, if any, ethical issue is involved in this case?
Legally the financial vice president is not obligated to move to the new standard; however, I do see an ethical issue with this decision. The ethical decision lies in the fact that the vice president is knowingly presenting financial statements that do not reflect the true condition of the company. This is a great example of the line between ethics and law. Technically, if one is not breaking a law, then one is not creating fraud; however, this does not imply that the actions are not controversial, particularly if they impact employees’ well beings. As CPA and auditors, it is not our job to remove risk. FASB gives detailed rules-based guidance because in our current litigious environment companies have proven over and over again that management needs this guidance to ensure that transactions are reported consistently and appropriately.
Ethics are suppose to go beyond the court room. In my opinion, in practice when applying principles, one is to meet legal expectations while being trustworthy.
b. Is the financial vice president acting improperly or immorally?
I do believe that the vice president is acting inappropriately because he knows that the report does not reflect a fair presentation of the company’s financial condition. The objective of general purpose financial reporting is to provide financial information about the business that is useful to present and potential equity investors, lenders, and creditors in making decisions in their capacity as capital providers. Information that is decision-useful to capital investors is also used by managers and executives to make important, impactful determinations about business operations.
c. What does Hoger have to gain by advocacy of early implementation? Hoger’s promotion shows her responsibility to the public’s trust, her complex body of
Case 1-2 Accounting Ethics
a. What, if any, ethical issue is involved in this case?
Legally the financial vice president is not obligated to move to the new standard; however, I do see an ethical issue with this decision. The ethical decision lies in the fact that the vice president is knowingly presenting financial statements that do not reflect the true condition of the company. This is a great example of the line between ethics and law. Technically, if one is not breaking a law, then one is not creating fraud; however, this does not imply that the actions are not controversial, particularly if they impact employees’ well beings. As CPA and auditors, it is not our job to remove risk. FASB gives detailed rules-based guidance because in our current litigious environment companies have proven over and over again that management needs this guidance to ensure that transactions are reported consistently and appropriately.
Ethics are suppose to go beyond the court room. In my opinion, in practice when applying principles, one is to meet legal expectations while being trustworthy.
b. Is the financial vice president acting improperly or immorally?
I do believe that the vice president is acting inappropriately because he knows that the report does not reflect a fair presentation of the company’s financial condition. The objective of general purpose financial reporting is to provide financial information about the business that is useful to present and potential equity investors, lenders, and creditors in making decisions in their capacity as capital providers. Information that is decision-useful to capital investors is also used by managers and executives to make important, impactful determinations about business operations.
c. What does Hoger have to gain by advocacy of early implementation? Hoger’s promotion shows her responsibility to the public’s trust, her complex body of