Before releasing financial statements to the public, Exotic Corporation's board of directors meets to discuss the previous year's results. This exchange is included in the discussion: "Well, this has not been a good year!" says company president Mark Reyes. Revenue is down, while expenses are way up. We'll report a loss for the third year in a row if we don't do some fancy stepping. I can temporarily transfer some land I own into the name of the company, which will help our balance sheet. Garry, can you shave P500,000 from expense? Then we can probably get the bank loan that we need.” "Mark, you're asking too much," says Garry Santos, the company's chief accountant. Accounting principles are designed to prevent this from happening: Required: What is the fundamental ethical issue in this situation? Discuss how the company president’s proposal violate accounting principles?
Before releasing financial statements to the public, Exotic Corporation's board of directors meets to discuss the previous year's results. This exchange is included in the discussion: "Well, this has not been a good year!" says company president Mark Reyes. Revenue is down, while expenses are way up. We'll report a loss for the third year in a row if we don't do some fancy stepping. I can temporarily transfer some land I own into the name of the company, which will help our balance sheet. Garry, can you shave P500,000 from expense? Then we can probably get the bank loan that we need.” "Mark, you're asking too much," says Garry Santos, the company's chief accountant. Accounting principles are designed to prevent this from happening: Required: What is the fundamental ethical issue in this situation? Discuss how the company president’s proposal violate accounting principles?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Before releasing financial statements to the public, Exotic Corporation's board of directors meets to discuss the previous year's results. This exchange is included in the discussion:
"Well, this has not been a good year!" says company president Mark Reyes. Revenue is down, while expenses are way up. We'll report a loss for the third year in a row if we don't do some fancy stepping. I can temporarily transfer some land I own into the name of the company, which will help our balance sheet . Garry, can you shave P500,000 from expense? Then we can probably get the bank loan that we need.”
"Mark, you're asking too much," says Garry Santos, the company's chief accountant. Accounting principles are designed to prevent this from happening:
Required:
What is the fundamental ethical issue in this situation?
Discuss how the company president’s proposal violate accounting principles?
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