I have chosen to share fraudulent activity for Luckin Coffee. Luckin Coffee is a China based holding

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Question:

I have chosen to share fraudulent activity for Luckin Coffee. Luckin Coffee is a China based holding company, a coffee retail business. Luckin Coffee was found to be in a fake revenue scandal. In 2019, stock rose from $20 per share to $50 in a year. In 2020, financial analysts found that they company's growth was artificially inflate due to $310 million in bulk sales to businesses, linked to the company's chairman. They also found that Luckin management had fraudulently engineered the purchase of $140 million in raw materials from suppliers (WTOP News , 2022).

China's finance ministry issues administrative penalties to the operating entities for the company. The SEC charged Luckin Coffee with defrauding investors, misstating company revenue, expenses, and net operating loss to falsely appear to achieve rapid growth and increased profitability and to meet companies' earnings estimates. Luckin Coffee agreed to pay $180 million penalty to resolve the charges (Commission, 2020). Therefore, I do believe the situation was handled correctly. GAAP: GAAP calls for companies to appropriately file their monetary effects. IMA standards of professional conduct: IMA standard 2B requires accountants to preserve their objectivity and integrity.

The situation could have been avoided if the chairman would have just reported what actual bought and used. The chairman should have not been trying to put profits over the company's reputation. The accountant in this situation could have voiced their findings anonymously and went by the standards and knew that financial statements weren't making sense and reported him.

Directions:

In your responses to your peer post above, address the following:

Do you agree with your peers' responses on how the situation was handled? Why or why not? If you do not agree, provide at least one constructive suggestion on how to handle the situation.
Do you agree with your peers' responses on how the situation could have been avoided? Why or why not?
Do you agree with how the accountant in the situation could remain unbiased and be ethical? Why or why not?