Advanced Accounting Essay

2555 Words 11 Pages
CHAPTER 1 ETHICAL ISSUES IN ADVANCED ACCOUNTING
ANSWERS TO REVIEW QUESTIONS
1. “Cute accounting” is stretching the form of accounting standards to the limit, regardless of the substance of the underlying business transactions or events. “Cooking the books” is fraudulent financial reporting. The Equity Funding Corporation of America fraud is significant for management accountants and financial executives because the fraud was carried out over a nine-year period by at least 10 executives of Equity, several of whom were CPAs with public accounting experience. This fraud furnished clear evidence of the need for ethics codes for management accountants and other financial executives. Four components of ethical conduct for management
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Further, critics of codes of ethics allege that they often become the basis for a minimum level of conduct and for conduct that complies with the letter, but not the spirit, of an ethical rule. Loophole seekers attempt to defend what appears to constitute unethical behavior by pointing out that no specific rule of a code of ethics specifically proscribes the conduct. All three professional societies require their members to behave ethically. For example, the IMA has the following rule in its Standards of Ethical Conduct for Members: Members have a responsibility to perform their professional duties in accordance with relevant laws, regulations, and technical standards. A comparable rule of the FEI is as follows: All members of FEI will comply with rules and regulations of federal, state, provincial, and local governments, and other appropriate private and public regulatory agencies.

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In like vein, Rule 102 Integrity and Objectivity of the AICPA Code of Professional Conduct reads as follows: In the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others. The foregoing rules

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