Question

True or false

9. Karen is a Certified Management Accountant and is bound by the IMA's Standard of Ethical Content. Her superior has asked her to try to influence the firm's outside auditors with expensive gifts and favors. if Karen complies, she will violate the competence standard. T/F

10. Misclassifying a product cost as a period cost will usually cause the income statement to be incorrect, but the balance sheet will not be affected. T/F

Answer 1

9

True, the code of ethics and conduct specifically states that any hindrance or mismanagement with the help of undue influence over the auditors violates the competence standard. This is so because, due to undue influence such as gifts or favors, the auditors may not conduct their auditing tasks with utmost independence and objectivity. This will thus result in misstatement of financial statements by the firm’s management and the true & fair view will not be presented.

10

False, product cost is the cost of creating a product, which includes direct labor, material and overheads etc. The overall cost of inventory stated in the balance sheet is the aggregate of product costs of the units stocked.

Whereas, period costs are different from product costs and are associated with factors like selling & distribution costs, etc.

Misclassification will alter the values in both, income statement & balance sheet.