Explain ethical challenges an accountant could face in recog
Not what you're looking for?
Explain ethical challenges an accountant could face in recognizing revenue for a firm. How could these challenges be addressed?
Purchase this Solution
Solution Summary
Your tutorial is 844 words and gives five examples of how revenue recognition is fuzzy enough to create ethical challenges.
Solution Preview
Unfortunately there are many ethical issues surrounding revenue and that is why there are more fraud causes involving revenue recognition than any other fraud activity! Here are five potential ethical issues.
1. Stuffing the channel.
There is a temptation if sales are under target to call you favorite customer and ask them to place an order for their next week's demand at year end. Your ship prior to year end and record the sale. Technically correct. This shifts demand from one year to the earlier year. Of course, unless demand picks up, this creates another situation at the next year end because there is only 51 weeks of demand reflected (since the first week of the year was accelerated into the prior year). Now what? You have to accelerate one or two weeks into the year Again you call the favorite large customers who are happy to help in order to get a nice 5% discount (incentive). This can grow each year and it takes more and more to get the current year looking good. This is a tough ethical issue since encouraging sales and shipping them prior to year end is not against GAAP. But it can dance at the edge of the line. What happens if the customer says, "Sure. You keep it ...
Education
- BSc, University of Virginia
- MSc, University of Virginia
- PhD, Georgia State University
Recent Feedback
- "hey just wanted to know if you used 0% for the risk free rate and if you didn't if you could adjust it please and thank you "
- "Thank, this is more clear to me now."
- "Awesome job! "
- "ty"
- "Great Analysis, thank you so much"
Purchase this Solution
Free BrainMass Quizzes
Understanding the Accounting Equation
These 10 questions help a new student of accounting to understand the basic premise of accounting and how it is applied to the business world.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Basics of corporate finance
These questions will test you on your knowledge of finance.
Team Development Strategies
This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.
Understanding Management
This quiz will help you understand the dimensions of employee diversity as well as how to manage a culturally diverse workforce.