Case 1bos 20iot toThe board of directors of Exotic Corporation is meeting to discuss the nostvear's results before releasing financial statements to the public, Thediscussion includes this exchange:Mark Reyes, company president: "Well, this has not been a good year!Revenue is down and expenses are up - way up. If we don't do some fancystepping, we'll report a loss for the third year in a row. 1 can temporarilytransfer some land that I own into the company's name, and that will beef upour balance sheet. Garry can you shave P500,000 from expenses? Then wecan probably get the bank loan that we need."Garry Santos, company chief accountant: "Mark, you are asking too much.Accounting principles are designed to keep this sort of thing fromhappening."Required:1. What is the fundamental ethical issue in this situation?2. Discuss how the company president's proposals violate accountingprinciples.

Ethical issues in Accounting There are many types of ethical issues which are incurred to the…

Garry Santos, company chief accountant: “Mark, you are asking to8 Accounting principles are designed to keep this sort of thing from happening." Required: 1. What is the fundamental ethical issue in this situation? 2. Discuss how the company president's proposals violate accounting principles.

Garry Santos, company chief accountant: “Mark, you are asking to8 Accounting principles are designed to keep this sort of thing from happening." Required: 1. What is the fundamental ethical issue in this situation? 2. Discuss how the company president's proposals violate accounting principles.

Corporate Financial Accounting

14th Edition

ISBN:9781305653535

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter14: Financial Statement Analysis

Section: Chapter Questions

Problem 14.7EX

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Question

Case 1
bos 20iot to
The board of directors of Exotic Corporation is meeting to discuss the nost
vear's results before releasing financial statements to the public, The
discussion includes this exchange:
Mark Reyes, company president: "Well, this has not been a good year!
Revenue is down and expenses are up - way up. If we don't do some fancy
stepping, we'll report a loss for the third year in a row. 1 can temporarily
transfer some land that I own into the company's name, and that will beef up
our balance sheet. Garry can you shave P500,000 from expenses? Then we
can probably get the bank loan that we need."
Garry Santos, company chief accountant: "Mark, you are asking too much.
Accounting principles are designed to keep this sort of thing from
happening."
Required:
1. What is the fundamental ethical issue in this situation?
2. Discuss how the company president's proposals violate accounting
principles.

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