Litigation, Censures, and Fines   The ACC KarParts Company

Litigation, Censures, and Fines   The ACC KarParts Company

Ethics are the key factor in the field of accounting because of the strong effect they have on the honesty and trustworthiness of financial data. Accounting professionals are given the duty to record and report financial transactions in a way that is both accurate and transparent. Ethical behavior is what makes sure that accountants follow a strict code of moral principles, which includes honesty, objectivity, confidentiality, and professional competence (Endenich & Trapp, 2020). Thus, by keeping these ethical standards, accountants maintain the trust of the public, improve the credibility of financial statements, and promote fair and ethical business practices. Ethical accounting practices encourage transparency, prevent fraud and corruption, and allow stakeholders to make decisions based on reliable financial information. The official ethical standards for the accounting profession are established by the American Institute of Certified Public Accountants (Poje & Zaman Groff, 2022). I must abide by the additional ethical standards established by my organization as well as the AICPA’s ethical principles in my capacity as ACC KarParts’ accountant.

It would be dishonest of me to utilize the knowledge I have gained from my job as an accountant for my benefit. It would be beneficial but unethical for me to transfer funds from one period to another. Notably, maintaining objectivity and avoiding conflicts of interest are additional requirements for accountants. For the ACC KaarParts case, I would be shirking my responsibility as an accountant if I let my thoughts wander to the bonus I might get instead of keeping a level head in doing the right thing. Thus, careful application of accounting principles and competence in this area are also critical qualities in an accountant.

Knowingly, transferring money from one accounting period to another is wrong according to GAAP. Since I oversee all accounting for my company, it’s possible that my supervisor is not as knowledgeable about accounting ethics and principles as I am. I would explain to Quinn that transferring money between accounting periods is against GAAP. Further, making that choice once could cause someone to make that choice again in the future, hence it is a slippery slope. There may be legal ramifications, such as fines and jail time, for transferring funds between periods.

I would advise Quinn on how to achieve our business objectives in a way that complies with GAAP and ethical standards. Increasing prices is one strategy we could employ to achieve our annual profit target of 30%. While remaining in compliance with GAAP accounting rules, raising prices will result in higher annual revenues. We could also increase our profit margin by decreasing our expenses. Finding methods to reduce our fixed overhead costs is another option. We can save money and increase our profit margin by eliminating expenses that do not add value to the company (Al-Hashimy, 2022). Thus, there is no need to engage in an unethical practice to attain the desired profit position.

Conclusively, as the accountant for ACC KarParts, I have to adhere to the GAAP accounting standards and the AICPA’s code of ethics. Although it is unethical and does not adhere to GAAP standards, my supervisor has requested that I transfer revenue from one period to another so that we can reach the 30% profit target. A 30% annual profit is still achievable if the business raises prices while cutting expenditure and fixed overhead costs.

References

Al-Hashimy, H. N. H. (2022). A review of accounting manipulation and detection: technique

and prevention methods. International Journal of Business and Management

 Invention, 11(10), 82-89.

Endenich, C., & Trapp, R. (2020). Ethical implications of management accounting and control:

A systematic review of the contributions from the Journal of Business Ethics. Journal

of Business Ethics, 163(2), 309-328.

Poje, T., & Zaman Groff, M. (2022). Mapping ethics education in accounting research: A

bibliometric analysis. Journal of Business Ethics, 179(2), 451-472.

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You are the accountant for ACC KarParts, a thriving company that makes auto parts. You oversee all accounting functions within the company. Quinn, your supervisor, has informed you that if the company’s profits grow by 30% this year, you will receive a $30,000 bonus, and she will receive a $60,000 bonus. No bonuses will be awarded if profit growth is less than 30%. Near the end of this fiscal year, the two of you have the following conversation:

Litigation, Censures, and Fines   The ACC KarParts Company

Quinn: We are getting close to 28% profit by the end of this year. If this happens, neither you nor I will get any bonus. What can be done to reach our target and get our bonus?
You: There is nothing we can do to reach 30% profit this year. However, we can plan to reach that target next year.
Quinn: If we claim some of next year’s revenue as part of the current year, you will get your bonus, I will get mine, and the investors will be happier. Therefore, everybody will be happy.
You: Uh, Quinn, that would be an unethical action.
Quinn: We are simply moving revenue from one period to another. We are not faking the revenue transactions.
As an accountant, what would you do in this situation?

Instructions
Write a 2–3 page report explaining to Quinn why you can’t move revenue from one period to another. In the report:

Explain the importance of ethics in accounting.
Apply ethical principles and professionalism to the case at ACC KarParts.
Based on generally accepted accounting principles, recommend at least three acceptable legal alternatives to meet company goals