Who could be harmed by frosts unusual accounting changes

Reference no: EM131558965

Ethics: Changes in Estimate

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!"

Answer the following questions in the Discussion Board:

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

b. Who could be harmed by Frost's unusual accounting changes?

c. What should Crane do in this situation?

Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2016). Accounting changes and error analysis. Intermediate accounting (16th ed.). (p. 1323). New York, NY: John Wiley & Sons, Inc.

Reference no: EM131558965

Questions Cloud

What are the five levels of customer expectations : What are the five levels of customer expectations? What are the risk factors of a balance sheet audit?

Should property rights dominate labor rights : When efficiency, equity, voice, and other employee, union, and corporate goals conflict with each other, what should happen next?

Is pamela''s argument sound why or why not : Is Pamela's argument sound why or why not Provide an example of a valid argument that is also sound

What defenses might be useful to greg : Sports Law Directions: Read carefully consider the facts. Then, craft a well thought out discussion/response to the Fact Pattern using the questions provided.

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

Discuss the pricing of an insurance policy : In the market for most consumer goods and services we assume the law of supply and demand, operating through open competition, determines the price.

The option price using the risk-neutral probabilities : Evaluate the option price using the risk-neutral probabilities from (b).

Analyze a movie that includes a portrayal of mental illness : PROJECT - MOVIE ANALYSIS - MOVIE PROJECT. The objective of this activity is to critically analyze a movie that includes a portrayal of mental illness

Non-programmed decisions : Explain (1) Programmed & (2) Non-Programmed Decisions and give an example of each.

User Account

All Pages