Chapter 4, Problem 4EC

As the auditor for Company A, you discover that a material sale ($500,000 sale; cost of goods of $300,000) was made to a customer this year.  Because of poor internal accounting controls, the sale was never recorded.  Your client makes a management decision not to bill the customer because such a long time has passed since the shipment was made.  You determine, to the best of your ability, that the sale was not fraudulent.  Using the framework for ethical decision making, determine whether the auditor should require either a recording or a disclosure of the sales transaction.  Instructions: Using the framework for ethical decision making, determine whether the auditor should require either a recording or a disclosure of the sales transaction.  Please make sure to use at least 100 words in your response.  Once you give your response, please respond to at least two of your peers using at least 50 words in your responses.  Remember to follow the netiquette guidelines found in the course…

Your client is preparing financial statements to show the bank. You know that he has incurred a refrigeration repair expense during the month, but you see no such expense on the books. When you question the client, he tells you that he has not yet paid the 1,255 bill. Your client is on the accrual basis of accounting. He does not want the refrigeration repair expense on the books as of the end of the month because he wants his profits to look good for the bank. Is your client behaving ethically by suggesting that the refrigeration repair expense not be booked until the 1,255 is paid? Are you behaving ethically if you agree to the clients request? What principle is involved here?

Peter Pan is a young accountant who came from a poor family. He was recently hired by a big company called PetraPak. When it was time to audit the accounting books of the company, Peter was instructed by his boss to manipulate the numbers in order to reduce the taxes expense the company will have to pay the Bureau of Internal Revenue. The company official said that if he would not heed the command, he would be terminated. The employment condition that time was really tight and the chance of finding another job is very minimal. Question: If you were Peter Pan, will you obey your boss? Why? Or why not?