Strayer University Week 9 Ethics in Accounting Questions

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Ybaqnwnz

Business Finance

Strayer University Lithonia Campus

Description

Assignment: Ethics in Accounting


Due Week 9 and worth 170 points

Effective financial reporting depends on sound ethical behavior. Financial scandals in accounting and the businesses world have resulted in legislation to ensure adequate disclosures and honesty and integrity in financial reporting. A sound economy is contingent on truthful and reliable financial reporting.

Instructions:

  • Read the following scenario.
  • Answer the questions that follow. This will be a 2-3 page submission in a question and answer format (also in paragraph form). An introduction and conclusion is not required.
  • Refer back to your textbook for guidance on how to think through the scenario.

You have been recently hired as an assistant controller for XYZ Industries, a large, publically held manufacturing company. Your immediate supervisor is the controller who also reports directly to the VP of Finance. The controller has assigned you the task of preparing the year-end adjusting entries. In the receivables area, you have prepared an aging accounts receivable and have applied historical percentages to the balances of each of the age categories. The analysis indicates that an appropriate estimated balance for the allowance for uncollectible accounts is $180,000. The existing balance in the allowance account prior to any adjusting entry is a $20,000 credit balance.

After showing your analysis to the controller, he tells you to change the aging category of a large account from over 120 days to current status and to prepare a new invoice to the customer with a revised date that agrees with the new category. This will change the required allowance for uncollectible accounts from $180,000 to $135,000. Tactfully, you ask the controller for an explanation for the change and he tells you “We need the extra income, the bottom line is too low.”

Required:

In a 2-3 page paper, discuss the following:

  1. Consider what you have learned relative to ethics and financial reporting. What is the rationale for the calculations/process used to estimate the $180,000 uncollectible allowance?
  2. How do you think the misstatement of funds will impact the income statement and balance sheet?
  3. What is the ethical dilemma you face? What are the ethical considerations? Consider your options and responsibilities as assistant controller.
  4. Identify the key internal and external stakeholders. What are the negative impacts that can happen if you do not follow the instructions of your supervisor?
  5. What are the potential consequences if you do comply with your supervisor’s instructions? Who will be negatively impacted?

Additional Requirements:

  • Use at least one (1) quality academic resource (in addition to your textbook) for this assignment. Note: Wikipedia and similar websites do not qualify as academic resources. You have access to Strayer University’s Online Library at https://research.strayer.edu and the iCampus University Library Research page at https://icampus.strayer.edu/library/research.

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Explanation & Answer

Attached.

Running head: ETHICS IN ACCOUNTING

Ethics in Accounting
Student’s Name

Affiliations

Course

Professor

Date

ETHICS IN ACCOUNTING

2
Question 1

On reading the scenario, there are valid reasons that prompted the controller to ask for the
preparation of year-end adjusting entries. The reasoning behind the supervisor's direction is that
the current aging category appears to have reached a high point. With this rate, the uncollectible
amount may not be received, which will increase the ratio of bad debts in the company. Thus, the
supervisor has advised the assistant controller to revise the category by reducing the number of
days that the irretrievable amount has been overdue. The supervisor's rationale for the process
used to estimate the $180,000 uncollectible allowance was to show the company there was still
more time to meet the obligations. Besides, .this will change the allowance of uncollectible
accounts from $180,000 to $135,000, showing that one has earned high profit than expected
(Bragg, 2018). I learned that businesses operating on credit have high risks, and the potential to
incur high losses during an aging period is high. Although the supervisor's rationale for adjusting
the accounts was understandable, the assistant controller was opposed to the directives because it
was ethically wrong.
Question 2
The misstatement of funds will affect the income statement through the inaccurate
reporting of the company's profits. At the start, it would look like a quick fix to adjust the bottom
line of the controller, but it will be a false representation of the company's actual figures.
Eventually, any misstatement will affect the accurate values o...


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