Case scenario presented on p. 836 (BYP17-8 Ethics), discussion help

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Please review the Ethics Case scenario on p. 836 in your text and answer the following questions.

  • Who are the stakeholders in this situation? Should they be the preparers' main concern? Why? Why not?
  • Was there anything unethical about the President's actions? Was there anything unethical about the controller's actions? Explain.
  • Are the board members or anyone else likely to discover the misclassification? Explain.

 

Jan 15th, 2016

Thank you for the opportunity to help you with your question!

a.  Who are the stakeholders in this situation? Should they be the preparers' main concern? Why? Why not?

In this situation. 10 stockholders of the Riverside Automotive corp. 8 President and CEO Carl Stewart are the stakeholders. Stockholders will get the dividend and Carl Stewart's job is secure as long he produces supporting annual operating cash flows. Therefore stockholders and the President are the stakeholders in this situation.

b.  Was there anything unethical about the President's actions? Was there anything unethical about the controller's actions? Explain.

Yes, the president's action was unethical. The President Carl Stewart asks to the controller to increase the operating cash flows by $30,000. just because he wanted to secure his job.

Yes, the controller's action was also unethical. It was controller's responsibility to prepare the financial statements which give true and fair view of the companys financial position. Controller misrepresents the financial statements for the sake of President's job which is not ethical at all.

c.  Are the board members or anyone else likely to discover the misclassification? Explain.

Yes, the Audits can discover this misclassification. It is the responsibility of an audits to detect the fraud. Audits also ensures that the financial statements are presented in conformity with the comprehensive basis of accounting. In this way the audits can detect this misclassification.


Please let me know if you need any clarification. I'm always happy to answer your questions.
Jan 15th, 2016

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