Many companies have established business codes of conduct that outline procedures for employees, suppliers, and customers to alert management about suspected accounting, internal control, or auditing problems. As discussed in this chapter, one potential violation of GAAP would be to capitalize period costs, inflating the value of inventory and understating the expenses on the income statement for the period. Coca-Cola Company provides a “Code of Business Conduct” at http://www2.coca-cola.com/ourcompany/pdf/business_conduct_codes.pdf that identifies the code and what constitutes a violation. Also provided arc examples of what employees and others can do if they suspect ethics or fraud violations at Coca-Cola. Go to the above Web site and find the following information:
a. Identify the accounting-related components of the code.
b. Review the section titled, “Administration of the Code.” Identify the steps that an employee would take if he or she wanted to report capitalization of period costs by a bottling plant manager.
c. Identify the types of disciplinary actions the company can impose on employees who are found to be in violation of the company’s code of conduct.
d. Identify how the violation might be recorded and who would be notified about the violation.
Internet sites are time and date sensitive. It is the purpose of these exercises to have you explore the Internet. You may need to use the Yahoo! search engine (or another favorite search engine) to find a company’s current Web address.
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