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    ethical issues in accounting

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    Anne Distagne was the CEO of Linkage Construction
    Inc., which served as the general contractor for the
    construction of the air ducts for large shopping malls
    and other buildings. She prided herself on being able
    to manage her company effectively and in an orderly
    manner. For years there had been a steady 22-25 percent
    growth in sales, profits, and earnings per share,
    which she wanted to continue because it facilitated
    dealing with banks to raise expansion capital.
    Unfortunately for Sue Fault, the chief financial officer,
    the situation has changed.
    "Sue, we've got a problem. You know my policy of
    steady growth?well, we've done too well this year.
    Our profit is too high: it's up to a 35 percent gain over
    last year. What we've got to do is bring it down this
    year and save a little for next year. Otherwise, it will
    look like we're off our well-managed path. I will look
    like I didn't have a handle on our activity. Who
    knows, we may attract a takeover artist. Or we may
    come up short on profit next year."
    "What can we do to get back on track? I've heard we
    could declare that some of our construction jobs are not
    as far along as we originally thought, so we would only
    have to include a lower percentage of expected profits
    on each job in our profit this year. Also, let's take the
    $124,000 in R&D costs we incurred to fabricate a more
    flexible ducting system for jobs A305 and B244 out of the
    job costs in inventory and expense them right away."
    "Now listen, Sue, don't give me any static about
    being a qualified accountant and subject to the rules
    of your profession. You are employed by Linkage
    Construction and I am your boss, so get on with it. Let
    me know what the revised figures are as soon as possible."
    1. Who are the stakeholders involved in this decision?
    2. What are the ethical issues?

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    Solution Summary

    The solution contains the ethical issues involved if the company does not follow accounting standards and the stakeholders whose interests are affected by these issues.