Survey Of Accounting
4th Edition
ISBN: 9780077862374
Author: Edmonds, Thomas P.
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 17E
To determine
Recognize and comment the ethical principle that are violated by the controller and CFO (chief financial officer).
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#23
ESB. ACCOUNTING CONNECTION Careful scrutiny of accounting records and financial
statements can lead to the discovery of fraud or embezzlement. Each of the situations
that follow may indicate a breakdown in internal control. Indicate the nature of the pos-
sible fraud or embezzlement in each of these situations.
1. Wages expense for a branch office was 30 percent higher in 2014 than in 2013, even
though the office was authorized to employ only the same four employees and raises
were only 5 percent in 2014.
2. Sales returns and allowances increased from 5 percent to 20 percent of sales in the
first two months of 2014, after record sales in 2013 resulted in large bonuses for
the sales staff.
3. Gross margin decreased from 40 percent of net sales in 2013 to 20 percent in 2014,
even though there was no change in pricing. Ending inventory was 50 percent less
at the end of 2014 than it was at the beginning of the year. There is no immediate
explanation for the decrease in inventory.
4. A…
Subject: Accounting Information System
ETHICS, FRAUD, AND INTERNAL CONTROL
Stated Problem:
EXPENSE ACCOUNT FRAUD
While auditing the financial statements of Petty Cor-poration, the certified public accounting firm of TrueBlue and Smith discovered that its client’s legal expenses account was abnormally high. Further investigation of the records indicated the following:•Since the beginning of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip.•Swindle, Fox, and Kreip were not Petty Corporation's attorneys.
A review of the canceled checks showed that they had been written and approved by Mary Boghas, the cash disbursements clerk.
Boghas’s other duties included performing the end-of-month bank reconciliation.
Subsequent investigation revealed that Swindle,Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees.…
Chapter 10 Solutions
Survey Of Accounting
Ch. 10 - 1. What are some differences between financial and...Ch. 10 - 2. What does the value-added principle mean as it...Ch. 10 - 4. How does product costing used in financial...Ch. 10 - 5. What does the statement costs can be assets or...Ch. 10 - 6. Why are the salaries of production workers...Ch. 10 - 7. How do product costs affect the financial...Ch. 10 - 8. What is an indirect cost? Provide examples of...Ch. 10 - 9. How does a product cost differ from a selling,...Ch. 10 - 10. Why is cost classification important to...Ch. 10 - 11. What is cost allocation? Give an example of a...
Ch. 10 - 13. What are some of the common ethical conflicts...Ch. 10 - 14. What costs should be considered in determining...Ch. 10 - 15. What is a just-in-time (JIT) inventory system?...Ch. 10 - Prob. 14QCh. 10 - Prob. 15QCh. 10 - Prob. 16QCh. 10 - Prob. 17QCh. 10 - Prob. 18QCh. 10 - Prob. 19QCh. 10 - Prob. 1ECh. 10 - Identifying product versus general, selling, and...Ch. 10 - Classifying costs: Product or SG&A cost; asset or...Ch. 10 - Prob. 4ECh. 10 - Prob. 5ECh. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Prob. 9ECh. 10 - Prob. 10ECh. 10 - Prob. 11ECh. 10 - Prob. 12ECh. 10 - Cost of goods manufactured and sold The following...Ch. 10 - Prob. 14ECh. 10 - Prob. 15ECh. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Value chain analysis (Appendix)
Audiomax Company...Ch. 10 - Prob. 19PCh. 10 - Prob. 20PCh. 10 - Prob. 21PCh. 10 - Prob. 22PCh. 10 - Prob. 23PCh. 10 - Prob. 24PCh. 10 - Prob. 25PCh. 10 - Prob. 26PCh. 10 - Prob. 27PCh. 10 - Prob. 1ATCCh. 10 - Prob. 3ATCCh. 10 - Prob. 4ATCCh. 10 - Ethical Dilemma Product cost versus selling and...
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- Case study 1: While auditing the financial statements of Petty Corporation, the certified public accounting firm of Trueblue and Smith discovered that its client’s legal expense account was abnormally high. Further investigation of the records indicated the following: • Since the beginning of the year, several disbursements totaling $15,000 had been made to the law firm of Swindle, Fox, and Kreip. • Swindle, Fox, and Kreip were not Petty Corporation attorneys. • A review of the canceled checks showed that they had been written and approved by Mary Boghas, the cash disbursements clerk. • Boghas’s other duties included performing the end-of-month bank reconciliation. • Subsequent investigation revealed that Swindle, Fox, and Kreip are representing Mary Boghas in an unrelated embezzlement case in which she is the defendant. The checks had been written in payment of her personal legal fees. Required: a. What control procedures could Petty Corporation have employed to prevent this…arrow_forward11-36 financial accountingarrow_forward10arrow_forward
- Ansarrow_forwardWhat has been the main thrust of recent changes in the financial reporting rules following the financial scandals of Enron, Worldcom, etc.? Multiple Choice To improve internal control over companies' financial reporting. To add to the work of the companies' external accountants. To force the companies to disclose more of their internal information. To provide incentives to increase their net income. < Prev 27 of 50 Nextarrow_forwardCase 6-5 Vertical Pharmaceuticals Inc. et al. v. Deloitte & Touche LLP1 On December 13, 2012, Vertical Pharmaceuticals Inc. and an affiliated company sued Deloitte & Touche LLP in New Jersey state court for alleged accountant malpractice, claiming the firm’s false accusations of fraudulent conduct scrapped a public company’s plans to acquire Vertical for more than $50 million. Vertical is a privately owned company that sells niche prescription drugs geared toward women’s health and pain management. Trigen Laboratories (TLI) sells and markets generic drugs. Deloitte was auditing the 2011 financial statements of Vertical and TLI, which are owned by the same three partners, when it abruptly suspended that review because of supposedly troubling items that two whistleblowers brought to the firm’s attention, according to the complaint, which was filed November 21 in Morris County Superior Court. Deloitte insisted that Vertical hire independent counsel and conduct an internal…arrow_forward
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