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Litigation, Censures, and Fines

Litigation, Censures, and Fines

Importance of Ethics in Accounting

Manipulating revenue recognition violates the fundamental rule that revenue should equal the costs required to get that revenue. The earned money should be reported as such, and expenses should be documented as they are incurred to generate that revenue. One would misrepresent the company’s financial performance and profitability if they artificially inflated sales in the current quarter. Furthermore, changing revenue recognition can lead to inaccurate financial statements, misleading stakeholders and investors who rely on accurate information to make sound decisions (1). Investors anticipate accurate and transparent financial reporting to evaluate the company’s current standing and prospects. Misrepresenting revenue can potentially undermine our relationships with investors and the company’s reputation in the long term by undermining trust and credibility.

Moreover, legal repercussions may also result from using improper accounting techniques. Accurate and faithful depiction of financial information is therefore required by accounting legislation and standards, including the International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) (2). The firm and others involved would be subject to legal and regulatory concerns if there was purposeful manipulation of revenue recognition. Lastly, ethical conduct is necessary to preserve a strong workplace culture and foster integrity inside our firm. Accountants set an example for others via their conduct, and by preserving moral principles, we support a climate of professionalism, trust, and ethical corporate conduct.

Ethical Principles and Professionalism

The use of ethical standards and professionalism in this situation at ACC KarParts is essential. I would apply the principles by first not altering revenue recognition or using dishonest tactics as an accountant in order to preserve honesty. Even if doing so prevented one from getting a bonus, they would ensure that all financial information was disclosed honestly and properly. Additionally, I would uphold tight secrecy by refraining from giving unauthorized parties access to sensitive financial information or exploiting it for my benefit. Maintaining secrecy protects the safety of the business interests and the confidence of its stakeholders. In addition, I would abide by all applicable laws, rules, and accounting guidelines like GAAP or other relevant international standards. By adhering to these recommendations, I would ensure that financial reporting is correct, dependable, and compliant with the law.

Recommendations to Meet the Company’s Goals

The first way to meet the company’s goals is by strengthening cost control to increase profitability. The business cost structure will be analyzed, and areas, where expenses need to be cut for efficiency to be achieved, will be the main focus as the cost-cutting strategies are set in place. This might entail improving supplier negotiations, simplifying operations, or optimizing production methods. The business may increase its profitability by cutting costs without sacrificing quality.

The company should consider increasing the product offering or venturing into new markets. Also, they should conduct market research to have a clear picture of consumer preferences, trends, and prospective market gaps. ACC KarParts can expand its income potential and gain more market share by launching new products that meet consumer wants or entering new markets. They should also study and plan to ensure that the expansions are viable and profitable for the company.

The company should review and improve the company’s marketing and sales plans. This entails developing more effective customer relationship management strategies, digital marketing activities, targeted advertising campaigns, or investigating commercial collaborations. ACC KarParts may increase sales and revenue by successfully marketing goods and services and broadening its clientele.


Brent Mittelstadt. 2019. Principles alone cannot guarantee ethical AI. p. 501-507.

Basil Varkey. 2021. Principles of clinical ethics and their application to practice. p. 17-28.


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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 Finess

Litigation, Censures, and Fines

  • 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 the next year revenues to be 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?


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

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

Use three sources to support your writing. Choose sources that are credible, relevant, and appropriate. Cite each source listed on your source page at least one time within your assignment.

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