Accountants, Ethics, and the Financial Statements ( 2 5 Marks ) For some time, Hernadez Pty Co
Fantastic news! We've Found the answer you've been seeking!
Question:
Accountants, Ethics, and the Financial Statements Marks
For some time, Hernadez Pty Co a beverage manufacturer has been selling to the west
coast region, however recently their market share has been dwindling. The coming summer
season presents an opportunity for the company to expand its operations to capture the lost
territories. Like many other Managers of businesses and other organizations, the Chief Executive
Officer CEO is very concerned about how their current financial statements reflect their
management and performance of the enterprise, since they will be forced to approach a local
bank for additional funding. This is very natural and generally appropriate too, because such
concerns are more likely to lead managers to want to do a good job of managing the enterprise.
But it can also lead to temptations to consciously alter the information in the managers favour.
The possibility of such a temptation is part of the reason auditors are employed by organisations
to examine financial statements, including the existence and proper functioning of internal
controls.
Additionally, temptations to alter the information in favour of the management also
produces ethical problems for professional accountants employed by the enterprise. On the one
hand, such an accountant is bound by the ethical rules of their profession to see that proper
accounting methods and procedures are followed in preparing the companys general purpose
financial statements, which would imply that the information should not be altered in
managements favour. On the other hand, such an accountant works and reports for the senior
management and is likely bound by the contract of employment to put the enterprises interests
first. Hence, there is a case of constant ethical dilemma facing accountants.
What does such an accountant for example, the chief accountant responsible for
preparing the enterprises financial statements do if senior management for example, the Chief
Executive Officer wants to alter financial statements to make things look better and makes a good
case that such an action will in fact help the enterprise get bank loans and other assistance it
needs from third parties transactions?
Required:
Discuss this situation from the point of view of both the chief executive officer and the chief
accountant bringing out the salient features and concerns.
Related Book For
Posted Date: