Accounting Ethics, Essay Example

Simon is taking this action in order to reflect good performance in the financial statements for the year ending 2000. The major reason is to reflect less liability, high value of assets and increased profits. The effect of his action on the financial statements for the year ending 2000 will be as follows: the sale of furniture worth $10,000 which is to be shipped in 2001 will overstate sales for the year since it’s not an actual sale. If cut off is applied, such a sale should be reflected in the books in 2001. This will increase the company’s profits as well as overstate the stocks since no delivery was done. By making no adjustments to salaries owed at the end of the year, Simon will be understating his liabilities and overstating the profits. This will give good report to his lenders, and increase his chances of qualifying for a loan due to his creditability. The prepaid insurance that has expired; by Simon not making the adjustment on the same, the current assets will be overstated, and since it was not taken as an expense after expiry the, profits will be overstated. The action taken by Simon will show good performance of his business to the lenders i.e. high profits, substantial value of assets and less liability. This will enable him to qualify for a loan as he anticipates, by the beginning of 2001.

The action is not ethical; the accountant should adhere to the code of ethics which govern his actions in public practice. By accepting to record the furniture sale, and failure to adjust insurance and accrued salaries accounts, he does not depict the due care to the public and the lenders since he is giving them misleading information. The integrity that is expected of him as an ethic is not shown; Simon is not honest to the lenders due to wrong financial statements that he intends to use to get a loan.

The parties harmed by Simons’ actions are lenders and the accountant. The lender is harmed since he is to rely on the wrong financial statements given by Simon. The lender is made to believe that, Simon’s business is doing well and he has few liabilities or financial obligations. They may end up giving him a loan which he may default, while the assets standing as collateral are overvalued. The accountant being a member of AICPA, if his actions are noticed by the regulatory body, he may be disciplined by expulsion or revocation of his practicing license. The parties that will benefit out of his unethical action will be the government and himself. The government will get more tax remittance due to overstated profits. Simon will benefit by qualifying for a loan as per his plans by getting funds to solve his financial problems.

Reference

Ketz, J.E. (2006). Accounting Ethics: Crisis in accounting ethics. New York: Routledge.