ACC418 Unit 7 unethical management and financial statement fraud Questions

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Business Finance

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**There are 2 discussion questions below. Write a 250 word response for each Discussion Question. Please use 1-2 reference as well.

DISCUSSIONS:

o Discussion Question 1: Most accountants, CEOs, and CFOs agree that it is unethical to manage earnings using accounting techniques that violate GAAP or are misleading. However, there is not a unified opinion about whether or not it’s unethical to manage earnings using management operations—for example, performing maintenance ahead of schedule in order to smooth earnings. (see http://college.cengage.com/accounting/resources/st... and http://www.insead.edu/facultyresearch/areas/accounting/events/documents/Bartonetal2010.pdf). Do you think it is ethical to smooth earnings by waiting to sell an asset at a profit or by performing an activity to recognize expenses sooner?


o Discussion Question 2: The SEC accused Xerox of committing financial statement fraud in order “to polish its reputation on Wall Street and to boost the company's stock price” (https://www.sec.gov/news/press/2003-70.htm). What ethical system do you think was being used by Xerox’s management?

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Running head: ACCOUNTING 418

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Accounting 418
Name
Institution

ACCOUNTING 418

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Discussion One

When some companies are experiencing a bad business period, they will result in
smoothing earnings so that they can give the impression that the business is doing well. For
instance, the chief finance officer (CFO) can wait to sell an asset at a profit. This is referred to as
short-selling. Notably, this practice is unethical due to the fact that it will create motivation for
the business manager to engage in activities that are outside the law (CFA Institute, 2010). For
example, CFO can engage in the spreading of wrong information so that the asset can increase its
price. Additionally, short selling means that one is making a profit from the hardship of other
people. Also, short selling is unethical s...


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