Reference no: EM132524173 , Length: word count:2000
UG034 Ethics And Conduct Of Accounting Profession - College of Banking and Financial Studies
Part A - Two compulsory questions
Problem 01
Warren Buffet, one of the business tycoons in present era said, "Managers that always promise to ‘make the numbers' will at some point be tempted to make up the numbers". The statement emphasis of having ethical persons as head of companies. If the CEO and strategic level management who practices fraud, they can twist earnings to make them look better than they really are, thereby deceiving the users of the financial statement.
a) Discuss the motive for earnings management with suitable examples
(Maximum word count - 400 words)
b) Evaluate earnings management from the utilitarian perspective. Can earnings management be an ethical practice? Explain why or why not.
Problem 02
(Maximum word count - 200 words)
Assume you are facing an interview at an audit firm. A member of the interview panel asked you to justify the link between, moral intensity, ethical leadership, and organizational culture and how it will impact on the accounting firm?
Craft a response that you feel comfortable by describing the characteristics of ethical leaders, the role of moral intensity in developing ethical organisations and evaluating the importance of ethical leadership in accounting firms with suitable examples.
Part B
Mariam CPA is the accountant of a public listed company. She just completed meeting with Salman, who is the Chief Financial Officer (CFO) of the company. Salman tried to convince Mariam to go along with proposal to combine the revenue expenditures (15 various revenue expenditures such as repair of motor vehicle, fuel expenditure etc.) related to vehicle maintenance into one amount (OMR 40,000). Mariam knows that OMR 40,000 is a material amount to earnings and rules in accounting require the expenses related to day to day operations for a specific period should be linked to revenue generated for the same period. Which will yield the most accurate income statement result. Therefore, Mariam asked time to think about this matter.
However, at the end of the meeting Salman stated, "Mariam, you can get back to me tomorrow on how you are going to work it out. But keep in mind that you should act upon the request of management. Therefore, I really want you to act in favour of my proposal to capitalize the revenue expenditure to boost the earnings and meet the earnings expectation of financial analyst. This statement shows that Maryam is under great deal of pressure to fulfill the requirement of Salman. Further Salman informed that adjustment on accounting entries will help to provide for a bonus to management including herself.
Assume you are in Mariam's position
Critically evaluate the given scenario and provide the possible course of action that should be taken to resolve the ethical dilemma.
Attachment:- Ethics And Conduct Of Accounting Profession.rar