Stock options: Stock options are the stock-based compensation plans provided in the form of an option to buy certain number of shares for a certain price during certain period.
Facts of the case: In an audit survey by an auditor, DR, a CPS firm, it is found that a multinational company, MC Industries, being a long-time client of the firm, has changed its accounting method of inventory from last-in-first-out to first-in-first-out. On investigation, it is found that this change is done to increase the net income above $44,000,000, through which it facilitates the increase in the number of shares to executives as per the stock option plan, otherwise which it will not happen.
To discuss: The ethical dilemma, impact of following controller’s suggestions, the beneficiaries, and the injured
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INTERMEDIATE ACCOUNTING RMU 9TH EDITION
- HI6026 AUDIT, ASSURANCE AND COMPLIANCE Question 5 You are an audit manager at Carillion & Associates and have been assigned to the audit of Colette Hayman Ltd (CHL) for the year ending 30 June 2020. CHL is an Australian manufacturer, wholesaler and retailer of women’s handbags and shoes. CHL manufactures all its products at its Melbourne factory and sells via retail outlets throughout Australia. CHL is listed on the Australian Securities Exchange, and Carillion & Associates has been its auditor for several years. In recent years, CHL has been finding it difficult to meet its projected profit forecasts due to increased competition from new local competitors, imported products and online shopping; the increasingly high Australian dollar; and the impact of the global and USA financial crisis on consumer spending. During the planning stage of the audit, you become aware of the following matters: CHL has significant loans from its bank. The bank has indicated that it is concerned…arrow_forwardQuestion 37 The Sarbanes-Oxley Act strengthens auditors’ independence by requiring that: Group of answer choices All audit team members must rotate off of the engagement after five years. The lead partner and concurring partner must rotate off of the engagement after five years. A publicly held company must change audit firms after five years. A publicly held company cannot hire someone as chief financial officer if that person worked on the audit within the last five years.arrow_forwardBER 2021 CONFIDENTIALEAB31103_Audit 2 Page 9 of 10Question 5Nurin, Aliah & Co has audited Kinokuyi Publishing Sdn Bhd (KPSB) for several years. Auditdocumentation, including internal control flowcharts as well as sales and cash receipts system,purchasing and payables system and payroll system notes, are accessible from the previousyear's file. You are the audit supervisor of Nurin, Aliah & Co, and you are evaluating thepaperwork documenting KPSB’s purchasing and payables system in preparation for theinterim and final audits for the fiscal year ending 31 December 2021. The company is a bookretailer with twelve locations across the Klang Valley and a central warehouse located in ShahAlam which holds the majority of the company's inventory. Below is an excerpt from theexisting systems notes:Store managers are in charge of placing book orders for their store. Store managers arecurrently unable to request books from any of the other eleven locations. Customers who wantto order books…arrow_forward
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