Just passed the CPA exam and got a job at Sparks a specialty internet retailer with warehouse and sale personal throughout the USA and part of your compensation is in stock option but you have a lot of question regarding company internal control system and lack of documentation regarding journal entries.

Manager: I have some year-end adjustment I need you to make. I need you to adjust 850,000 for bill and hold sale. Also apply 500,000 from our affiliate to the outstanding balance in the nevus account. This one is significantly past due and I don’t want any question from auditor. One last thing I need you reduce the reserve for doubtful accounts by half a million. The manager hand you all the paper work and tell you she has meeting to attend.
Later you read up the guidance and concluded that the timing of the revenue recognition for the bill and hold sale is not appropriate you also recall over hearing the account receivable clerk James calling nevus about its significantly overdue balance. The call of a bit of a shouting match ending with bill slamming down his phone. You conclude that all three entries are material and believe them to be an error you are conflicted. Since you were not aware of company finical condition.

Manager: I understand you concerns the adjustment are material had no impact on current year earning and they are made consistently year after year. I need you to fill out this borrowing base certificate for the bank its due on Friday. We have to renew, extend and increase are debt facilities. Also the auditors are coming on Monday.
After thinking about it throughout the day you decide not to book the adjustment or complete the borrowing base certificate. You have decided to give notice effective Friday to avoid having to disclose anything the auditors.

1). Please state what the ethical dilemma(s) is/ Make sure you include what they are for the different people directly involved and for the whole organization.
2). If you are the CPA with the dilemma, what approach would you use to pursue the matter from here?
3). Based on that approach – and the breadth of responses you are likely to face – what basic types/categories of solutions are you likely to arrive at?

Answer rating: 100% (QA)

1 According to the statement the dilemma is that the managers carelessness and inefficiency o... View the full answer