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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Exercise 1-55 Professional Ethics

Ethical behavior is essential to the conduct of business activity. Consider each of the following business behaviors:

a. A manager prepares financial statements that grossly overstate the performance of the business.

b. A CPA resigns from an audit engagement rather than allow a business client to violate an

accounting standard.

c. An internal auditor decides against confronting an employee of the business with minor violations of business policy. The employee is a former college classmate of the auditor.

d. An accountant advises his client on ways to legally minimize tax payments to the government.

e. A manager legally reduces the price of a product to secure a larger share of the market.

f. Managers of several large companies secretly meet to pin price reductions designed to drive up-and-coming competitors out of the market.

g. An accountant keeps confidential details of her employer’s legal operations that would be of interest to the public.

h. A recently dismissed accountant tells competitors details about her former employer’s operations as she seeks a new job.

Required:

Identify each behavior as ethical (E) or unethical (U).

To determine

Concept Introduction:

Morals are judgments, standards, and rules of good conduct in the society. They guide people toward permissible behaviour with regard to basic values. Business ethics are business policies and practices which are made to conduct a business in an ethical and moral way. Ethics can be found it laws but some are developed with the situations and moral and acceptable social behaviors.

To Indicate:

If the given behavior is ethical or unethical.

Explanation

Morals are judgments, standards, and rules of good conduct in the society. They guide people toward permissible behavior with regard to basic values. Business ethics are business policies and practices which are made to conduct a business in an ethical and moral way. Ethics can be found it laws but some are developed with the situations and moral and acceptable social behaviors. The given behaviors are identified as ethical or unethical as follows:

    BehaviorEthical or Unethical
    aUPreparing misstated financial statement is unethical
    bEAuditor's resignation is ethical in case the management is violating the standards.
    cUThe internal auditor should not mix his personal issues with professional work...

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