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Accounting Ethics in ABC Corp

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Business people facing ethical dilemmas are not uncommon; however, how one chooses to resolve the situation is critical. At ABC Corp, a six-step approach has been used very successfully. They are these:

1. Obtain the relevant facts.
2. Identify the ethical issues form the facts.
3. Determine who is affected by the outcome of the dilemma and how each person or group is affected.
4. Identify the alternatives available to the person who must resolve the dilemma.
5. Identify the likely consequence of each alternative.
6. Decide the appropriate action.

Using this six-step approach, list three ethical dilemmas a CPA at ABC Corp might face, resolve the dilemmas, and decide the appropriate action.

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DILEMMA ONE

According to the CPA Journal, "Accountants are involved in the preparation and presentation of budgets. One ethical issue facing [them] revolves around pressures from individual departments or divisions to use the budgeting process to maximize their share of allocated corporate resources. If the accountant develops an unrealistic budget, this could result in needless investment in unnecessary equipment or the production of excess inventory. Using stakeholder analysis (which analyzes the decision in terms of all affected parties both internal and external to the company) the accountant could evaluate this effect in terms of possible future layoffs, lost opportunity cost of a more effective use of corporate resources in other segments of the business, and possible loss of wealth to the stockholders when actual earnings don't meet expectations.

Capital budgeting is another area of planning which is ripe with ethical dilemmas. Since many companies have elaborate mechanisms to evaluate capital budgeting requests, CPAs may confront pressures from divisional managers to circumvent the formal process. This could take the form of breaking up a large expenditure into smaller components. The smaller requests, in turn, might not need to comply with as formal and rigorous guidelines as ...

Solution Summary

Over 1000 words run through the steps of resolving ethical dilemmas in a large corporation.

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