This week’s discussion is centered on the case scenario presented in the EC 17 Ethics Case (attached below).
Since cash is the most important asset in a firm, success of a firm can be directly traced to its cash management. Though reliance on cash flows to the exclusion of accrual accounting is discouraged, comparing cash from operations to net income can reveal important information about the “quality” of reported net income.
Please review the EC 17 Ethics Case scenario on page 17–57 in your text and answer the following questions.
Who are the stakeholders in this situation?
Was there anything unethical about the president’s actions? Explain.
Was there anything unethical about the controller’s actions? Explain.
What is the impact of reclassifying the 2-year notes payable to an account payable? Explain with examples.
What is the other financial statement that must be reclassified in this case? Explain with examples.
Who do you think might discover the reclassification and correct it? Explain.
