Litigation, Censures, and Fines
Week 8 Assignment - Litigation, Censures, and Fines
Overview
You are the accountant for ACC KarParts, a thriving company that makes auto parts. You oversee all accounting functions within the company. Quinn, your supervisor, has informed you that if the company's profits grow by 30% this year, you will receive a $30,000 bonus, and she will receive a $60,000 bonus. No bonuses will be awarded if profit growth is less than 30%. Near the end of this fiscal year, the two of you have the following conversation:
Quinn: We are getting close to 28% profit by the end of this year. If this happens, neither you nor I will get any bonus. What can be done to reach our target and get our bonus?
You: There is nothing we can do to reach 30% profit this year. However, we can plan to reach that target next year.
Quinn: If we claim some of the next year revenues to be part of the current year, you will get your bonus, I will get mine, and the investors will be happier. Therefore, everybody will be happy.
You: Uh, Quinn, that would be an unethical action.
Quinn: We are simply moving revenue from one period to another. We are not faking the revenue transactions.
As an accountant, what would you do in this situation?
Instructions
Write a 2–3 page report explaining to Quinn why you can't move revenue from one period to another. In the report:
Explain the importance of ethics in accounting.
Apply ethical principles and professionalism to the case at ACC KarParts.
Based on generally accepted accounting principles, recommend at least three acceptable legal alternatives to meet company goals.
Use three sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment.
Litigation, Censures and Fines
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Litigation, Censures and Fines
Importance of Ethics in Accounting
The accounting role is considered essential in any firm due to its responsibility for financial matters. As a result, ethics and professionalism are mandatory to ensure that financial information released is always accurate, transparent, and reliable for all stakeholders (Ferrell et al., 2021). As a professional occupation, accountants are required to always adhere to best practices and relevant codes of conduct, thus maintaining trust and integrity for themselves and the organizations they represent.
In accounting, ethics promote compliance with legal requirements and any financial regulations of the industry concerned. In most countries, any form of violation of such regulations can have severe consequences for the firm, including hefty fines and potential lawsuits from affected stakeholders (Metcalf et al., 2019). As a result, upholding ethical standards maintains the relationship with regulatory bodies, investors, and clients, who are the most essential to the organization.
Apart from that, upholding ethical standards further improves stakeholder trust in the organization. As the custodians of all financial instruments, accountants hold a fiduciary duty to the stakeholders and are required to be trustworthy and honest in their dealings (Carnegie et al., 2022). This means that any misconduct can have a long-term effect on the stakeholders who rely on the reliability of the financial information provided to them. Maintaining ethics in such dealings ultimately promotes a positive relationship between the firm and its stakeholders.
Lastly, reputation and brand image are essential for institutions in all sectors. Consequently, ethics in accounting can assist in maintaining a positive brand that can attract more potential investors, thus strengthening the organization's financial position in an industry (Ferrell et al., 2021). A competitive advantage can propel a company to further success by attracting top talents and new customers that are drivers of growth. Therefore, maintaining such ethics in accounting can assist organizations in achieving their goals.
Applying Ethical Principles and Professionalism to the Case at ACC Karparts
In this case, the attempt to manipulate the company's revenue for the year in order to gain bonuses would be a direct violation of ethical principles and standards of accounting. The most important principles that would apply to this case include integrity, objectivity, and competence.
With regard to integrity, Quinn tries to convince the accountant of the possible benefits that would be accrued with the change in revenue for the year. However, the accountant remembers their fiduciary duty to stakeholders, which requires honesty and transparency in reporting (Metcalf et al., 2019). As a result, the refusal to manipulate the revenue, despite the possible personal gains to be made, demonstrates the principle ...