Northwest Construction CO., Inc.
The cases provide an analysis of Bob Hawkins and Lou Naber who are co-owners of Northwest construction co., inc. The two partners started the business ten years ago. Based on the partnership agreements, the two partners almost share the ownership of the company and have identical employment. However, their personal affairs are not in good order, and need to develop personal financial plans. Each of the parties reveals to the tax accountant their future plans about the development of their financial plans. Lou revealed to you the plans of her wife-leaving job to stay home. While Bob has potential investors who want to finance the company and may buy out Lou ownership for $ 35,000 and a three-month salary as agreed. I assume that the tax accountant keeps the information and data confidential.
The case consists of the ethical concerns of confidentiality. It involves the accountant and each of the partners, Lou and Bob. Both partners reveal personal and sensitive information that could harm the reputation and productivity of the company. Thus, the personal accountant is expected to maintain confidentiality on the information received. Confidentiality seeks to provide appropriate information on financial items.
According to the rules and regulations of the AICPA code of professional conduct, the accountants are required to enhance the confidentiality of data and sensitive information disclosed by the partners. This occurs because the partners have full trust and confidence in the professional accountants. Therefore, the accountant should not use the information disclosed by the partners for personal gains and judgments (Delaney and Whittington 120).
If the partners disclose the information to any party, they may be liable for imprisonment. Since it reveals the unscrupulous behaviors of the accountant that may lead him to face serious legal issues. The alternative solutions to any unethical concerns could include negotiations between the parties. Therefore, the appropriate legal guideline suggests that the accountant must maintain his obligations and ethical duty. The outcome of unwarranted disclosure of confidential information is the suing of the professional accountant and remedies provided to the harmed party.
The case explains that Henry Monterrey observed that there was an increase in the revenues of the company. The case identifies the investigation of Henry towards the causes of the large increases in revenues. After the CPA reviewed the invoices, he discovered that a decrease in the unit costs of goods lead to an increase in the revenues. Monterrey was responsible for determining the changes on revenues before publishing the results. Relevant discussion with the brothers on the unexpected results, one of the brothers was not appreciative of the meeting. Monterrey interviewed long-time employees to obtain better reasoning and information. The assumption of the cases relates to the candy stores being caught in money laundering and this could explain the increase in revenues with constant prices and volumes. This provides background information on the case of the company.
The ethical issue is the lack of information on the large increase in revenues. The company was not well informed on the reasons behind the increased revenues. The changes in the proportion of the cost of goods and revenues raise concerns to the CPA who is not able to publish the financial statements. The ethical concerns involve the brothers and management that seem unaware of the unusual findings. The misrepresentation of financial statements items is based on the performance of the services to the company’s requirements. According to the rules and responsibilities of the accountant, they must adhere to the appropriate accounting standards to interpret the information in accordance with the organization’s performance.
According to the AICPA code of professional conduct, the CPA is required to excise caution and competency. In certain occurrences, it provides that the parties should take part in the appropriate compliance with the accounting standards and policies. The CPA should act based on the accosting principles required. In case of disclosures on the immaterial of the revenues items, can affect the credibility of the information in the financial statements. This relates to the financial statements information that confirms with the Generally Accepted Principles (GAAP) (Whittington 121). The principles of accounting require compliance with rule 102 on relevant judgments. The assessment of the relevant financial items assists in the compliance with professional options, material misrepresentation, and violation of laws. The outcome of the cases is the alteration of the revenues in order to fit the accurate revenues of the company.
Smoke and Mirrors
The case describes Chuck Adkins who is a CPA who has completed his tax returns for XYZ Company. He has worked in the business for five years in which the public has grown immensely. XYZ has failed in the keeping of accurate records and information. In a review of past information of the company reveals discrepancies in the company’s books in which the assets were undervalued. In clear discussion with Chuck Adkins, Hanson stated that there were plans to go to Big Bank for a certain amount of working capital for business expansion. The credit line will be offered based on receivables, inventory, and equipment.
The case also states that the bank needed a review by an accountant in order to approve the loans. Adkins informed Jack about a $ 125,000 loss in which he responded that he expected such a thing. Jack is convinced after the loss made in the previous year. Big Bank will not be willing to guarantee the credit. Jack argued that accountants could interpret and report data in order to reflect false pictures. Jack’s attitude towards the accounting firm is adverse.
The ethical issue arises on the integrity and objectivity of the accountants and Jack reducing the conflicts of interests in the current situations. This relates to the misrepresentation of facts based on the judgments of other people. The members are required to consider the misrepresented information on assists that were undervalued. The misjudgments of the financial statements entries can be accepted under rule 102 of the AICPA, section 501. The section states that the financial reports and statements should not contain false and misleading information and data (Brooks and Dunn 34).
Under the case, there were various alternatives to minimize the conflicts of interest in the company. It can consider the professional judgments of the accountants that ignore are subjective implications of the owners of the business. Furthermore, the company should consider appropriate records and tax reporting. The outcome of the case relates to obtaining the correct figures of the financial statement items. Jack should not insist on the manipulation of the data and figures but on the fair judgments of the past data. This assists in obtaining credit line from the Big Ban
Brooks, J. Leonard., and Dunn, Paul. Business & professional ethics for directors, Executives & accountants. Boston, MA: Cengage Learning, 2009. Print
Delaney, R. Patrick., and Whittington, O. Ray. Wiley CPA exam review 2011, auditing and attestation, volume 1. New York: John Wiley & Sons, 2010. Print
Whittington, O. Ray. Wiley CPA exam review 2013, regulation. New York: John Wiley & Sons, 2012. Prin