Who could be harmed by frost unusual accounting changes

Assignment Help Financial Accounting

Reference no: EM132528885

Mike Crane is an audit senior of a large public accounting firm who has just been assigned to the Frost Corporation's annual audit engagement. Frost has been a client of Crane's firm for many years. Frost is a fast-growing business in the commercial construction industry. In reviewing the fixed asset ledger, Crane discovered a series of unusual accounting changes, in which the useful lives of assets, depreciated using the straight-line method, were substantially lowered near the midpoint of the original estimate. For example, the useful life of one dump truck was changed from 10 to 6 years during its fifth year of service. Upon further investigation, Mike was told by Kevin James, Frost's accounting manager, "I don't really see your problem. After all, it's perfectly legal to change an accounting estimate. Besides, our CEO likes to see big earnings!"

Instructions
Answer the following questions.

Question (a) What are the ethical issues concerning Frost's practice of changing the useful lives of fixed assets?

Question (b) Who could be harmed by Frost's unusual accounting changes?

Question (c) What should Crane do in this situation?

Reference no: EM132528885

Questions Cloud

Analyze the roi of the training that was implemented : Imagine it is your task to calculate ROI for a hypothetical training program. Determine one key element that would factor into your calculation of ROI.

Explain purpose of management report on internal control : Explain the purpose and content of each of The Independent Registered Public Accounting Firm's Report on Internal Control Over Financial Reporting

Illustrates the essential aspects of the qualitative method : Prepare a slide PowerPoint presentation that illustrates the essential aspects of the qualitative method.

MA619 Accounting Research Assignment : MA619 Accounting Research Assignment Help and Solution, Melbourne Institute of Technology - Assessment Writing Service - Assess methodologies

Who could be harmed by frost unusual accounting changes : What are the ethical issues concerning Frost's practice of changing the useful lives of fixed assets? Who could be harmed by Frost's unusual accounting changes

Prepare journal entry : The ordinary shares have a market value of $40 per share, and the preference shares have a market value of $80 per share. Prepare journal entry

Eyespy software to monitor performance : Should the company be allowed to install the EyeSpy software to monitor performance?

What is the adjusting entry : Noora Company signed note by $212,500 on September 1, 2020, for Purchase of $190,000 of inventory, What is the adjusting entry

Discuss how changes in hr strategy will shape future of hr : Discuss how changes in HR strategy, business partnering, and/or technology will shape the future of HR. Professor Ulrich presents an interesting question.

User Account

All Pages