Question

For full credit, you are required to post at least one response to the week's question (due before the response to classmates' posts) AND provide two unique comments/questions to two different classmates' posts.

A full-credit initial post will be five sentences or more, contain correct grammar and spelling, and reflect your opinion along with a cite from an online source other than the textbook; late initial posts will receive a late deduction of 50%.

Responses to classmates need to be at least two sentences in length.

You are the controller for a pesticide manufacturer. The company's sales declined a great deal this year due to legislation passed that outlawed the sales of many of the company's products. The company will have environmentally safe and competitive products available next year, and sales are expected to greatly exceed the current year's sales.

The company president is concerned about the effect of the one year sales dip on the price of the company's stock and the potential of making the company a takeover target.

The president asks you to accrue every possible revenue and defer as many expenses as possible in order to maximize net income this year to keep the stock price stable.

Is the president's request ethical? What would your response be? Is your response ethical?

Answer 1

President's request is unethical. My response to President will be "NO". Reason of saying "NO" to president is laid down responsibilities in preparation of books of accounts under "GAAP" and books of accounts are supposed to be prepared basis GAAP.

What is GAAP: GAAPs are generally accepted accounting principles or rules which form the groundwork on which more comprehensive, legalistic and complex rules re based. There are ten principles under GAAP. Under which Principle of Sincerity ask accountant to provide the correct depiction of the financial situation of a business. Another Principle dealing with Non-Compensation says that the full details of the financial information should be disclosed including negatives & positives. Two main Principles are related to Utmost Good Faith and Full Disclosure. Under Principle of Utmost Good Faith, it is expected that presupposes that the parties remain honest in transactions and Full Disclosure Principle expects that while creating the financial reports, the accountants must strive for full disclosure. So