Question

Ethical issue

Ethical Issue You are a young ambitious accountant working for ABS Corp. At the end of the financial year shortly after your appointment the president of ABS, who is a friend of your father, instructs (a).not to record accrued wage expenses until next year because they won't be paid until then'and: (b) to record in this year's sales an order that will not be delivered until next year 'because the customer placed the order this year'. ABS would report a net income instead of a net loss if these instructions were carried out Using the guidelines provided in our course textbook (extract below) analyze the situation and explain what you would do.

Answer 1

Issue   Accountant work for ABC corp..President of ABC is friend of accountant's father.President of ABC instruct accountant for not recording accrued wage expense and to record sale that will not delivered till next year.

what should be done by Accountant

Ethically accountant should not do as per presidents's instructions because it will not provide true and fair view of financial statement .He should perform his duties independently without any biasness.

• Accountant should report accrued wage expense that will not be paid still next year.

Entry shall be passed

Wage expense

Accrued wage expense

It will lower net income of ABC

• Sale should not be reported unless sale is made .There is no journal entry for receiving order .

​​​​​​​If accountant perform as per president's instructions, income summary will show profit that doesn't indicate true financial performance.

Hence Accountant should not perform as per president's instructions and should make efforts for convincing president.