BUSINESS 696-X5437 Project IProject I Compliance ReportSouthern New Hampshire UniversityEthics in the Workplace Synopsis: This compliance report, dated April 7th , 2024, is to address a complaint in which has been filed implicating the manager involved (whom is CPA certified) with manipulating resu...
Ethics in the Workplace Synopsis: This compliance report, dated April 7th , 2024, is to
address a complaint in which has been filed implicating the manager involved (whom is CPA
certified) with manipulating results to overstate net income. This report will discuss the
ethical standards in which were not followed by the manager. Any violations that took place,
the repercussion for said violations and lastly any recommendations for the leadership team
in order to prevent this from happening again in the near future will also be discussed in this
report. Compliance Report: While researching this complaint, there were several violations in
which took place. To begin, we must discuss the accounting frameworks in which apply to
these reporting situations. In this particular case, the US GAAP (Generally Accepted
Accounting Principles) is where the violations begin. There was an overall violation with the
financial statement presentation. The violation here is that the manager involved (a CPA
certified manager) overstated net income by manipulating certain data items. Beginning with
the assets issue, the manager took it upon themselves to move certain expenses to prepaid
assets. Not all expenses can be deemed as prepaid assets. Only prepaid expenses can be
classified as an asset due to the "results from a business making advance payments for goods
, or services to be received in the future". With the changes that took place, there are no
indications on whether some of the expenses are due to prepaid expenses which may or may
be classified as an asset. As we are aware, with the improper classification's, assets may or
may not equal to liabilities and shareholders equity. Due to this, assets may be considered
overstated, and liabilities understated. This will cause misrepresentations as states will not
show the proper financial situation and/or potential a business may have. Next, we have the
issue of changing the depreciation method. Per ASC 250-Ruiz, 2
Ethics in the Workplace10-45-18 it states "that a change in method of depreciation is
considered a change in accounting estimate effected by a change in accounting principle.
"The new depreciation method is adopted in partial or complete recognition of a change in
the estimated future benefits inherent in the asset, the pattern of consumption of those
benefits, or the information available to the reporting entity about those benefits." In such
circumstances, the effect of the change in accounting principle, or the method of applying it,
is considered inseparable from the effect of the change in accounting estimate." Then lastly,
we have the issue surrounding deferred revenue where the manager changed this to standard
revenue. The difference between the two is quite simple. Deferred revenue is basically a
prepayment or advanced payment of services or goods in which will be delivered or
performed at later time in the future. Standard revenue on the other is simply when services
or goods are delivered or perform at the moment there is a monetary exchange. By the
manager classifying deferred revenue as standard revenue, the income statement then
becomes overstated simply because a percentage of net income has not yet been earned in
accordance with revenue recognition according to US GAAP. This leads into situations
regarding integrity, transparency and accountability. Beginning with integrity, we must
remember that in the accounting profession "integrity refers to the uncompromising
adherence to moral and ethical principles. Accountants with integrity maintain truthfulness in
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