Accounting business reporting for decision making 3rd edition solutions manual

Fraud A survey conducted by CPA Australia shows that at least one in four small businesses are affected by fraud. Employee fraud was the most common type reported, with 10 per cent of small entities indicating they had suffered as a result of employee fraud.

Other fraud incidences suffered by small entities included loss of funds from bank accounts 7 per cent , credit card fraud 7 per cent , supplier fraud 4 per cent and internet fraud 3 per cent. Comment on whether fraud is just part of doing business.

Should this cost be passed onto customers? If so, does that make fraud a personal loss or one for the community generally? This is an opinion-based question. The point of view will determine whether a business allows for the cost of fraud in pricing or have zero tolerance.

Stakeholders Choose a local business in your area and make a list of its stakeholders. Are some more important than others? List them in order of priority. Stakeholders could include but are not limited to the following: investors, creditors, employees and trade unions , customers, government, special interest groups, community.

Corporate governance and sustainability I put it to you that the directors are responsible to the shareholders for profit in perpetuity; and that this general expression of a principle permits, indeed requires, directors to pay full regard to their employees, to labour relations generally, to the community, to the country, in all their decisions for and on behalf of shareholders.

Sir John Dunlop, company director. The second part then indicates that he believes that to carry out this responsibility, a corporation has to consider all stakeholders. Corporate governance Outline some of the legal constraints in legislating for the consideration of stakeholder interests.

A number of constraints are listed below. It would be difficult for a board to be legally held accountable for all stakeholder interests. At times acting for the benefit of one stakeholder group may clash with another stakeholder group. It could be seen as infringing on the property rights of the shareholders who own the company.

There could be problems with regulating how a board is held accountable in balancing stakeholder interests. Could this be proved in a court of law? What evidence would be needed? Identifying stakeholders that the legislation would protect could be difficult. Processes for stakeholders to enforce their rights under the legislation could be difficult to establish.

Allowing a broader group to whom the board is responsible may water down their responsibility to anyone. Generally, many people may argue that most stakeholders or groups could seek remedy under existing legislation i.

This code lists several possible threats to the fundamental principles. Those threats include self-interest, self-review, advocacy, familiarity and intimidation. A Financial Interest in a Client. Jointly holding a Financial Interest with a Client. Undue dependence on total fees from a Client.

Having a close business relationship with a Client. Concern about the possibility of losing a Client. Potential employment with a Client. Contingent Fees relating to an Assurance Engagement. A loan to or from an Assurance Client or any of its Directors or Officers. Examples of circumstances that may create familiarity threats include, but are not limited to:.

Ethical decision-making models Your client MJM Ltd consults with you in relation to the new financial information system that it wishes to have installed. You are technically competent in this area, and so accept the engagement. You carry out an analysis of software available, and make a recommendation that the client accepts.

You continue to be involved while the software is being installed. Use the Langenderfer and Rockness model to help with your answer. What are the facts? You are the auditor of a company and you have taken on a management advisory service. What are the ethical issues? The main issue is that of independence and objectivity. Could you now audit the financial statements which were produced by the very system you installed?

It is not only enough that you are of independent mind but that you appear to be independent in the eyes of others. What are the norms, principles and values?

Independence, objectivity, conflict of interest, owe a duty to shareholders, community and public as well as to client. What is the best course of action consistent with the principles of integrity?

Not to take the audit. What are the consequences of the possible courses of action identified in 4 above? Option one is to undertake the audit and risk losing respect in the eyes of the shareholders and public with regard to independence and objectivity. Option two is not to undertake the audit. This may have immediate consequences for the client, especially if there is limited time for the audit to be completed.

It may also means loss of fees for you in the future as you will be giving up a long term engagement. Corporate governance Comment on the following situations in relation to the ASXCGC corporate governance principles and recommendations.

A member of a board of directors insists on being involved in the employment of personnel. The XYZ company ensures that as much information as possible about the operations and financial affairs of the company is made available on the company website.

The chairman of the board puts forward a proposal to remunerate the CEO. A board member is a major shareholder of a company that has tendered on a contract worth millions of dollars. When the board meets to consider the tenders received, the board member declares that she has a conflict of interest, and leaves the meeting room while the tenders are being discussed. The first principle encourages there to be a clear distinction between the responsibilities of the board and those of management.

It would be strongly argued that management should oversee the employment of personnel. Principle 4 recognises the need to safeguard the integrity of the financial reporting system. One safeguard is to ensure that the auditor is independent. If the auditor and a board member has a close personal interest then in the eyes of the public the auditor would not be seen as independent and thus lose credibility.

Principle 5 recommends the timely and balanced disclosure to promote accountability and transparency. Principle 8 recommends that remuneration has to be fair and reasonable and in line with performance.

Ethics As the director of a company, you need to make a decision regarding whether to shift the manufacturing operations offshore. Over recent years, the influx of cheap imports has made it harder to compete on a cost basis.

However, shifting the operations offshore will create job losses for a large number of local people. Your company is a major employer in the region, and the closure of the factory will have a significant economic effect in the area. Use the St James Ethics Centre method to identify the issues to consider. Company is struggling to compete due to cost. It is cheaper to use overseas labour. Would result in large negative economic impact on local community.

However, not to shift may result in company failing. Integrity, trust, social commitment, reliability. That the community relies on the business in totality. That there are no other ways of operating that can save the company and still enable its existence in the local community. There could be other avenues for cost saving. Maybe the company does not need to make so much profit. Maybe the local community could be asked for help.

They would be open to public scrutiny and may feel as if I let the community down if the operations shifted. Yes, if all avenues were exhausted and the decision to take the operations offshore was the necessary one. It may not only save the business but also some jobs to the community. May lead to a backlash of products. There would be no industry left in the local community and in this country.

Yes Have I considered the possibility that the ends may not justify the means? The shifting operations offshore may result in some job losses but some positions may remain. If the operations continue as currently then the business may go bankrupt and all jobs would be lost.

The CEO has asked you to prepare a report for the board supporting such a proposal. In this report you should outline: 1. Costs: Costs would include the cost of analysis, preparation and reporting; as well as the costs of setting up systems to gather data, process data and audit outcomes. Reporting to: The stakeholders of the business. Coverage: The standard coverage of a GRI report would include strategy and analysis, organizational profile, any identified material aspects, stakeholder engagement, profile, governance, ethics and integrity, management approach and economic, environmental and social indicators.

Business Strategy Report: Through the data capture and reporting process there will be a greater awareness of environmental and social initiatives and impact. This will help an organization with their strategy formulation and implementation. Ethical decision-making models You are faced with a number of situations as described.

Use the Langenderfer and Rockness model to help determine the course of action you would take. You are a manager within a large entity and need to make a recommendation to the CEO on which tender to accept. The job being tendered for is worth millions of dollars, and you have a significant share in one of the companies tendering. You are a small business owner who wants to enter an overseas market.

You arrange to meet with a government official of the country you wish to do business with, in order to discuss your market entry. To be successful, you really need his support. During the discussion, you realise that he expects a monetary payment in exchange for his help. Determine the facts of the case. Need to make a recommendation on tender.

You have a material personal interest in a tendering company. Determine the ethical issues in the case. Conflict of interest and material personal interest. Determine the norms, principles and values related to the case. Independence, objectivity and integrity. Determine the alternative courses of action. Determine the best course of action consistent with 3 above.

Best course of action would be to declare an interest and disqualify yourself from taking part in the decision-making process for this particular tender. Determine the consequences of each possible course of action identified in 4. Your objectivity and integrity will remain intact. It is not only necessary that you are independent; you need to appear to be independent from a third party.

Decide the course of action. It is best to declare an interest and step away from the decision making. You need to make a monetary payment to a government official. Your market entry depends on his support. It is against your culture to make such payments but it seems expected in this new country as the way of doing business. Honesty and integrity. Determine the best course of action consistent with 3 above It is best not to make the payment as this is consistent with the principles of your own culture.

If it was found out that a monetary payment was made, it may jeopardise your integrity at home. However, it would compromise what you believe to be right. It may also mean that further payments would be expected in the future by the government official.

That is, once you made a payment you may need to continue to do so. However, you may feel that you were uncomfortable doing business that way anyway.

You would also feel that you were true to your own character of honesty and integrity by not making the payment. It is best not to make the payment. Business sustainability Critique the role that regulation plays in encouraging business sustainability. In your answer define regulation and business sustainability.

Give your opinion as to whether existing legislation such as workplace health and safety and industrial relations such as award wages are necessary or just an extra burden on business that destroys efficiency and productivity. Business sustainability is about making decisions for the long term benefit of the business, environment and society. Government regulation helps promote behaviour and outcomes deemed valuable by that society. Regulation is used when business and citizens may act differently to what is generally good for society.

It is not only useful in trying to promote the good of society as a whole, but also to protect minority rights or aspects of life that could not protect themselves.

The environment is a good example of this. Legislation surrounding land ownership and rights to use land have been available in some shape or form for centuries. Water rights have been given greater legislative status over the last century. Given the shortage of water and its flows from one country to another over large continents the debate over water rights will no doubt increase over the next century and international organizations may increase calls for agreement over such rights.

However, the atmosphere has not in the past been valued or traded. Yet high polluting entities may affect the lives of others not economically benefiting from the production of the polluting entity. So regulation over carbon emissions in the environment by taxing it or through carbon trading is one way the government can help promote acceptable behaviour. Some entities may have been concerned about the effect their production processes have on aspects of the environment and some may not.

Through regulation the value of the atmosphere to all of society can be promoted. One aspect of the debate surrounding the issue of regulation is the short and long term horizons. Most entities report on the short term performance of the entity and most people consider their short term wants and needs over the consideration of long term outcomes.

In the short term, the cost of implementing workplace, health and safety policies and processes may cause a significant cost to the entity. Likewise, the regulation of minimum wages protects the community from entities willing to take advantage of those not in a position to negotiate their own payment. Code of ethics for professional accountants You are an accountant with ABC Ltd and are confronted with the situations described below.

You are appointed the auditor of Baba Ltd, a producer of golf equipment. While on the premises carrying out some audit work, you are offered a new set of golf clubs in appreciation of your work to date. You discover that your client, Black Ltd, has underestimated its income on its tax return. You ask the company to submit an amended return but it refuses. You approach one of your friends, who works for a lending institution, for an unsecured loan. You have been unable to obtain a loan elsewhere.

Your friend approves the loan. You are on the local council works committee. It is considering a number of tenders for a park upgrade. Your best friend has submitted a tender, and you argue strongly in favour of that tender.

You have been approached to be on the board of directors of a large regional business. Your spouse is employed as a manager within the company. The code of ethics requires objectivity and independence. Accepting gifts may be seen to compromise your objectivity and independence.

You must not only be independent of mind but also be seen to be independent. Integrity may also be hampered if accepting the gift. This raises the issue of a duty to the public and a duty to a client. On the one hand, the code of ethics is based on the premises of credibility, professionalism, quality of service and confidence.

The code of ethics states that accountants must maintain a sense of duty to the public interest. The public includes government. To discover an error and not report it may give you a sense that you have let down your responsibility to maintain a professional approach to your work, and a contribution in helping to establish confidence in the accounting profession and a credible and fair application of the tax system.

On the other hand, you have a duty to your client. Generally, you may feel that you have done all that you can by requesting that they resubmit the return. It is a hard decision to report a client and you may feel that you prefer to extinguish your relationship to the client. It is probably in your best interest not to deal with such people anyway.

Maybe a letter to your client outlining their responsibility, your responsibility and the consequences of their actions would help convince them and put you at ease that you have communicated with them fully and frankly in writing about the situation.

It is unfortunate that you placed your friend in this position. The code states accountants should act with. It seems that the person giving the loan has breached this. The person has also breached the public interest, integrity, objectivity and independence. In this situation it would have been appropriate to declare a conflict of interest and leave the meeting.

Your objectivity is impaired. Although you could argue that you are independent in mind, you would not be seen to be independent by third parties. It would seem that integrity, objectivity and independence would be breached. The code states that you maintain independence. This means that you not only have to be independent of mind but also independent in the eyes of third parties. You would need to consider whether you could actually remain objective in dealing with the issues and act in the good of the company as a whole.

The fact that your partner is a manager in the business may bias your thinking on some or all of the issues put before the board. You could excuse yourself from those issues that had a direct effect on your partner but overall most issues would have an indirect effect. Taking on the position may also have a negative effect on your integrity. A further issue is that of confidentiality. It would be necessary to ensure confidential board room documents and discussion remained confidential.

In all of the above situations it could be seen to be a breach of The Public Interest and professional behaviour. Corporations and social responsibility A corporation is an artificial entity. Discuss whether the rights of this artificial entity should ever take priority over the rights of individuals and communities. Everyone will have their opinion and arguments to support such opinions.

They are creations of the state and have evolved over time to the form that they take today. The laws can add rights and responsibilities and take them away. Others may argue there should be less government regulation and therefore more rights for corporations.

The rest may just accept that is the way corporations and business have evolved and that not much can be done to change this.

One from the local area or from current media. For example, should a corporation have a right to use the local water supply before individuals because they can pay more per kilolitre? Ethics Compare and contrast teleological theories and deontological theories. Discuss whether you think these theories have a place in the modern business society. Teleological theories are concerned with the consequences of decisions and if the actions result in good consequences then the behaviour is said to be ethical.

This raises two issues: i what is a desirable consequence and ii upon whose judgement is the consequence examined. A number of teleological theories have been proposed the most notable being ethical utilitarianism also known as consequentialism. Deontological theories are those concerned with duty.

Theological ethics would fall within this theory as it is concerned with the rules to follow according to religion. Another philosophy under this heading is Kantianism. Teleological theories are to do with consequences whereas Deontological theories are to do with motivation. Always check both your Spam and Junk mail if you did not see incoming emails in your inbox.

We provide free samples for any required Textbook solution or test bank to check and evaluate before making the final purchase for customer satisfaction. By visiting our site, you agree to our privacy policy regarding cookies, tracking statistics, etc. Read more. Accept X. Mintz quantity. Mintz , Steven M. Mintz The overriding philosophy of this text is to provide the instructor with comprehensive coverage of ethical and professional issues encountered by accounting professionals.

If you require any further information, let me know. Read more Accept X. Expenses Salaries and wages expense Supplies expense Depreciation expense Total expenses Net loss Less: Net loss Retained earnings, July 31, Property, plant, Salaries and wages payable Retained earnings The debt to assets ratio would increase from Looking at additional financial data, I would note that Fairview reported a significant loss for the current year which would lead me to question its ability to make interest and loan payments and even remain in business in the future.

I would not make the proposed sale unless Fairview convinced me that it would be capable of earnings in the future rather than losses. Its current ratio decreased from 2. Nordstrom would be considered much more liquid than Best Buy for the recent year. Satisfaction of current obligations usually requires the use of current assets.

If a company has more current assets than current liabilities it is more likely that it will meet obligations as they become due.

Since working capital and the current ratio compare current assets to current liabilities, both are measures of liquidity. Payment of current obligations frequently requires cash. Neither working capital nor the current ratio indicate the composition of current assets. However, doing so just to improve the year-end current ratio could be considered unethical if this action misled creditors. Its debt to assets ratio remained constant from to It was generating plenty of cash from operations to cover its investing needs.

In , American Eagle Outfitters experienced negative free cash flow. This deficiency could have been covered by issuing stock or debt. Going concern assumption Economic entity assumption Monetary unit assumption Periodicity assumption Historical cost principle Full disclosure principle.

The inventory was written up to its fair value when it should have remained at cost. The treatment of the transaction treats Victor Lopez and Lopez Co. The cash used to purchase the truck should have been treated as part of salaries and wages expense. This assumption states that the economic life of a business can be divided into artificial time periods months, quarters, or a year. By adding two more weeks to the year, Lopez Co. The company should use a 52 week year.

Intangible assets Goodwill Unearned sales revenue Insurance expense Utilities expense Maintenance and repairs expense Net income Add: Net income Less: Dividends Retained earnings, December 31, Less: Accumulated depreciation—equipment.. Expenses Cost of goods sold Salaries and wages expense Interest expense Income tax expense Retained earnings, April 30,