Question

Ethics Case ACCT 201- Fall Semester 2018 (S marks SUBMIT MONDAY 7H JANUARY 2019 Student Name: 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 you; (a).not to record accrued wage expenses until next year becouse hey 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 'becouse the customer placed the order this year, ABS would report a net income instead of a net loss ifthese instructions were carried out. Using the guidelines provided in our coursetextbook (extract below) analyze the situation and explain what you would do. Ethics-A Key Concept The goal of accounting is to provide useful information for decisions. For information to be useful, it must be trusted. This demands ethics in accounting. Ethlies are beliefs that distinguish Explain why ethics are ight from wrong. They are accepted standards of good and bad behavior Identifying the ethical path is sometimes difficult. The preferred path is a course of action that avoids casting doube on one's decisions. For example, accounting users are less likely to trust an auditor's report if the auditor's pay depends on the success of the client's business. To PinSabine-DAavoid such concerns, ethics rules are often set. For example, auditors are banned from direct cde af investment in their client and cannot accept pay that depends on figures in the clicnt's reports. codExhibit 1.6 gives guidelines for making ethical decisions EXHIBIT 1.6 Identify ethical concerns Make ethical decislon Gudeines for Eical Dedsion Making Consider all good and Providers of accounting information often face ethical choices as they prepare financial reports. These choices can affect the price a buyer pays and the wages paid to workers. They can even affect the success of products and services, Misleading information can lead to a wrongful closing of a division that harms workers, custoemers, and suppliers. There is an old saying: Good ethics are good business

Answer 1

(a) The expense recognition principle states that expenses should be recognized in the same period as the revenues to which they relate. In given case, Wage Expenses are relating to current period and Organisation's Operating Revenue would have been recognised. Therefore, It doesn't matter whether it is paid in current year or not, but it should be recognised in Current year only.

(b) According to the Revenue Recognition principle, revenues are recognized when they are realized or realizable, and are earned (usually when goods are transferred or services rendered), no matter when cash is received. If Invoice has been raised by the service Provider before the delivery, then such revenue can be recognised in the year of Invoice has been raised. Therefore, In the given case, since Delivery of goods not occurred during the year and no Invoice has been raised, such revenue should not be recognised during current year.

Considering the Extract provided above

i. Identification of Ethical concerns: Above Options comes under such Identification

ii. Analyse Options: Based on above options, it is clearly evident the Client want to Overstate the Revenue of Organisation, which is not Ethical.

iii. Make Ethical Decisions: Have a discussion with Management for adopting the accounting principles for the transactions they referred and Make sure Right decision is taken!