(solved) Case Studies on Ethics

Added on - 29 Apr 2020

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Running head: CASE STUDIES ON ETHICSCase Studies on EthicsName of the University:Name of the Student:Authors Note:
1CASE STUDIES ON ETHICSTable of ContentsCase Study 1........................................................................................................................2Question 1........................................................................................................................2Question 2........................................................................................................................2Question 3........................................................................................................................3Question 4........................................................................................................................4Question 5........................................................................................................................5Case Study 2........................................................................................................................6Question 1........................................................................................................................6Question 2........................................................................................................................7Question 3........................................................................................................................7Case Study 3........................................................................................................................8References..........................................................................................................................10
2CASE STUDIES ON ETHICSCase Study 1Question 1From analysis ofPreston Company it was observed that it is a manufacturing firm thatwishes to expand its product line in domestic equipment. For such reasons, list of fixed assetswas provided along with its acquisition date, original cost and accumulated depreciation onsingle asset basis. Fixed assets were old and so their book values were less than actual costs. Fairmarket values for fixed assets were deemed to be used in determining purchase price portion thatmust be allocated to goodwill.1Moreover, auditors of the parent company’s purpose were tobecome familiar with company operations and conduct an audit. They offered opinion on theconsolidated financial statement for the year. From such opinion, the owner realised that theparent company might sell few assets of the subsidiary company for expansion of its productlines. Moreover, an increased book value can also result in drastic loss as goodwill was used toincrease asset value and was not stated in financial statement.Question 2The ethical issue that took place in the company was regarding misrepresentation ofaccounts. Fixed assets ofPreston Company were deemed to be old and for this reason, their bookvalues were drastically lesser than the actual costs. Conversely, after completion of thecompany’s financial statements audit Wilson was surprised to observe misstatement of financial1Bobek, Donna D., Amy M. Hageman, and Robin R. Radtke. "The effects of professionalrole, decision context, and gender on the ethical decision making of public accountingprofessionals."Behavioral Research in Accounting27.1 (2015): 55-78.
3CASE STUDIES ON ETHICSstatements. This is for the reason that goodwill amount of $450,000 was not indicated but hasbeen employed for increasing the asset value.2With their asset values faster write-off of the same might occur in comparison to thegoodwill within 20 years. Considering this, it can be said that as perAmerican AccountingAssociation (AAA) ethical decision-making model to this asset valuation/goodwill problemmisrepresentation of accounts was done by auditors. The auditors either involve in such conductor failed to carefully audit assets of Preston Manufacturing Company.Question 3Six major principles, rules and values that are important to the evaluation of the case withspecific reference to Stephanie Wilson’s ethical dilemma are explained below:Establishing facts regarding the case to make sure that there is no ambiguity regarding thethings taken under consideration.3Identifying ethical issues within the case through asking the ethical issues those are atstake.Identifying certain norms that place the decision within its ethical, social and professionalbehavior aspect.2Cuomo, Francesca, Christine Mallin, and Alessandro Zattoni. "Corporate governancecodes: A review and research agenda."Corporate governance: an internationalreview24.3 (2016): 222-241.3Curtis, Mary B., et al. "National Culture and Ethical Judgment: A Social ContractApproach to the Contrast of Ethical Decision-Making by Accounting Professionals andStudents from the US and Italy."Journal of International Accounting Research(2017).
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