Financial Accounting Theory and Analysis Essay

Published: 2019-10-10 12:14:24
628 words
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Category: Theory

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a. What, if any, ethical issue is involved in this case?

Legally the financial vice president is not obligated to move to the new standard; however, I do see an ethical issue with this decision. The ethical decision lies in the fact that the vice president is knowingly presenting financial statements that do not reflect the true condition of the company. This is a great example of the line between ethics and law. Technically, if one is not breaking a law, then one is not creating fraud; however, this does not imply that the actions are not controversial, particularly if they impact employees well beings.

As CPA and auditors, it is not our job to remove risk. FASB gives detailed rules-based guidance because in our current litigious environment companies have proven over and over again that management needs this guidance to ensure that transactions are reported consistently and appropriately. Ethics are suppose to go beyond the court room. In my opinion, in practice when applying principles, one is to meet legal expectations while being trustworthy.

b. Is the financial vice president acting improperly or immorally?

I do believe that the vice president is acting inappropriately because he knows that the report does not reflect a fair presentation of the companys financial condition. The objective of general purpose financial reporting is to provide financial information about the business that is useful to present and potential equity investors, lenders, and creditors in making decisions in their capacity as capital providers. Information that is decision-useful to capital investors is also used by managers and executives to make important, impactful determinations about business operations.

c. What does Hoger have to gain by advocacy of early implementation?

Hogers promotion shows her responsibility to the publics trust, her complex body of knowledge, and her strength and competiveness of work done. Her awareness and forwardness can prevent the company from making unhealthy decisions. Hoger may not see the immediate impact in her career for her actions, but the world of accounting is an industry where good praise will spread quickly and go far. Her unconventional forwardness and emphasis on credibility and dependability is seen by the vice president and all involved. She is a true professional. If the vice presidents final decision is followed through, then hopefully shell be permitted to make a note in the financial statements or speak to her point when the deceitfulness of the statements is brought to the surface. I also like to think that shell sleep better at night.

d. Who might be affected by the decision against early implementation?

Those currently invested in the company, potential investors, lenders, and other creditors will be impacted. Information that is decision-useful to capital investors is also used by managers and executives to make important, impactful determinations about business operations. Ironically, by pretending the problem is not present, the vice president is creating a huge revenue-impacting nightmare for his company and setting-up for his own downfall. He is presenting phony information that will cause poor business decisions to be made by managers and executives of the company. The (unknown to be poor at the time) poor decisions can snowball into excess expenses, horrendous operational and production process changes, and lay-offs. This will all fall on the vice presidents shoulders, as explanations will be demanded as to how the companys position quickly changed. The desired consequence is to always apply sound accounting principles to information and supply results to external users to show the companys resource allocation process.

Per the text, the objective of a theory is to explain and predict. challenges relates to real or perceived differences between U.S. generally accepted accounting principles (GAAP) and IFRS with respect to their underlying philosophies.

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