Run Inc. Case Essay
1) What are the practical differences in the accounting for a change in estimate and a correction of an error? Why might managements prefer one approach to another? What pictures do the two accounting presentations paint for readers outside the company?
A change in estimate is a normal and ongoing process of a company. It usually arises from the appearance of new information that alters the current situation. Accounting for a change in estimate is treated prospectively. Companies do not need to disclose a change in estimate made as part of normal operation. However, if the change in estimate will affect future periods and also affect the current period, disclosures of the effect of the change are required. …show more content…
The responsibility of the Vice President of a Manufacturing company differs from the responsibility of the controller because the VP is in charge of the firm overall. His job duties are plan, organize, direct, and control the activities of the operation function of the company. He is responsible for the performance of all departments function.
3) Where should the controller's loyalties lie where there is a conflict between the interests of management and GAAP reporting? Does the controller have a different responsibility to the public than the Vice President of Manufacturing, for example?
When there is a conflict between the interest of management and GAAP reporting, the controller must always follow GAAP even if the company he works for has other direction of interests. The members of the accounting profession should act honestly, maintaining objectivity and integrity.
The controller has different responsibilities to the public than the Vice President of a company.
As stated in AICPA code, ET Section 53, “Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.”
The controller is accountable for the accounting operations of the division, to include the production of periodic financial