Ethical Issues In Frost's Practice Of Changing Accounting Discussion

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Question Description

Mike Crane is an audit senior of a large public accounting firm who has just been assigned to the Frost Corporation’s annual audit engagement. Frost has been a client of Crane’s firm for many years. Frost is a fast-growing business in the commercial construction industry. In reviewing the fixed asset ledger, Crane discovered a series of unusual accounting changes, in which the useful lives of assets, depreciated using the straight-line method, were substantially lowered near the midpoint of the original estimate. For example, the useful life of one dump truck was changed from 10 to 6 years during its fifth year of service. Upon further investigation, Mike was told by Kevin James, Frost’s accounting manager, “I don’t really see your problem. After all, it’s perfectly legal to change an accounting estimate. Besides, our CEO likes to see big earnings!”

Answer the following questions in the Discussion Board:

  1. What are the ethical issues concerning Frost’s practice of changing the useful lives of fixed assets?
  2. Who could be harmed by Frost’s unusual accounting changes?
  3. What should Crane do in this situation?

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Accounting changes and error analysis. Intermediate accounting (16th ed.). (p. 1323). New York, NY: John Wiley & Sons, Inc.

Tutor Answer

WINSTONs
School: UT Austin

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Answer the following questions in the Discussion Board:
1. What are the ethical issues concerning Frost’s practice of changing the useful lives
of fixed assets?

It’s important to remember that GAAP allows for a company to revalue as well as
change the depreciation basis of any of their assets as long as those reasons would
include changing outdated technology. The ethical concern here is that Frost is changing
the useful life of fixed a...

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Review

Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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