QUESTION 1

1.

You are the new controller for the consumer division of XYZ Company. In the past five

years, XYZs earnings have grown by at least 15% annually, with the consumer divisions

earnings growing by over 20% annually over the same time-period. In the 4th quarter of the

current year, however, it is projected that consumers income will grow by 8% and XYZs will

grow by 10%. The consumer divisions president wants you to take some of the following end

of the year actions in order to improve consumers reported earnings. Under the previous

controller, these types of actions were more or less taken as acceptable practices.

Deferring routine monthly maintenance on equipment by an outside vendor until

January.

2.

Extending the close of the fiscal year beyond December 31 so that some sales

from next year are counted in the current fiscal year.

3.

Altering dates on shipping documents so that sales made in January of the next

year appear to have occurred in December of the current year.

4.

Giving salespeople a double bonus to exceed December targets.

5.

Reducing the number of December advertising spots and increasing the number to

be run in January.

6.

Deferring advertising costs by asking the outside advertising agency to delay

sending out bills for December advertisements until January or by having the agency

indicate that advertisements run in December were run in January.

7.

Persuading customers to accept merchandise for shipment in December that they

would normally not order until the following year.