Accounting Theory and Contemporary Issues:

Accounting Theory and Contemporary Issues

Professional Scenario:

It has been observed from the professional scenario that Johnny is the in – charge on the audit engagement for ABC company. The PCAOB (Public Company Accounting Oversight Board) will visit this enterprise either for the purpose of inspection or investigation of audit papers of ABC enterprise. Johnny has received request firm this enterprise manager relating to this audit work papers. Although these work papers has been delivered, it has been found out that the file is incomplete as two main documents are missing (Brewer et al. 2014). These involved item worksheet and the final version of signed engagement letter. Although these work papers have been attained after few initial issues, these do not have engagement letter involving clients’ original signature. However, Johnny attained client’s signature at request of manager by not revealing actual insertion date. In this condition, the principle of auditing that has been violated is objectivity principle. Fiolleau and Kaplan (2017) opines that under this principle, the auditors are required to display highest professional objectivity level in gathering, assessing and communicating the information relating to auditing activities. Additionally, auditors are required to conduct balanced assessment of the relevant situation and hence there will be no influence while they make judgments. In this case, manager of this enterprise has influenced Johnny’s actions in submitting audit work papers (Dellaportas et al. 2014). Hence, Johnny cannot be considered as independent, which reflects violation of objectivity principle. Both Johnny and manger will face severe consequences if PCAOB members identifies that they have taken illegal measures for submitting audit work papers.

Student Scenario:

The scenario highlights that Samantha and Mary Jo are two friends studying  in same class. Mary Jo lacks in accounting subject and hence there is a probability that  she might not attain pass markets in exam. Owing to this Samantha advised Mary for using test banks as study guide. Mary Jo downloaded this test books but it is written in website that test banks are use for instructors (Tormo-Carbó Seguí-Mas and Oltra 2016). But Mary ignored this instructions and used this book to secure good marks in exam. This case reflects breaching of ethical principles that involves- honesty, responsibility etc. As Mary has implemented shortcut for attaining good marks  instead of learning the subject, the honesty principle has been breached. According to responsibility principle, individuals must maintain proper standard of conduct in learning. However, both of them do not have responsibility to assure this institution integrity. Thus, institution failing to catch Mary’s misconduct might sanction her for assuring integrity of this university.

Professional scenario

This case study reflects that the ABC company has audit issue since two main documents of this enterprise have been absent in final file. This might have huge affect on accounts books of this company (Scott 2015). It has also been recognized that supporting file has been absent. For instance, if revenue is one of the vital items of this ABC company’s, the management might intend to see revenue generated from its subsidiary. However, if they do not obtain relevant information, questions might be raised regarding the accurate financial information.. Hence, it might lead to trust loss of shareholders and its brand image in market. Although supporting worksheet was lost,  Johnny had electronic version of this paper.

The manager of this enterprise is one of the vital stakeholders in this scenario as Johnny performed the activities as per his directions. Although supporting paper has been lost, electronic version was available on computer hard drive. However, Johnny reprinted this paper at the managers direction but no explanations has been given during the time of making inclusion in final file. Johnny also included original signature of client but true insertion date has not been mentioned (Rankin et al. 2012). As a result, the managers responsibility would not be questioned as the individual collaborated with Johnny. Hence, Johnny would be warned or terminated owing to such irresponsible behavior.

Student scenario

    Mary and Samntha are the two stakeholders of the university where Mary pursues studies. As Mary approached Samantha for her inability in making preparation for exam, Samantha asked Mary to use test banks for securing good marks in exam. If this university catches Mary, then it might have adverse impact on her career. Thus, in this situation violation of academic integrity will be violated and thus the university will have to impose strict actions on students to maintain policies.

Professional Scenario

Johnny has performed his duties as per the directions of ABC company’s manager. Accordingly, Johnny delivers work papers to the manager before arrival of PCAOB members. Johnny being the head of audit team, the staffs working under his supervision will carry out this internal audit work. After completion of this work, the report is given to this enterprise. The manager asked for additional copy as he lost the original file (Madsen 2014). In this situation, Johnny should say that actual report is given to the enterprise and thus report has lost owing to the manager’s negligence. Hence, Johnny’s decision can be rationalized.

Student Scenario

It has been seen that Samantha and Mary Jo are the two friends studying in same class. Mary Jo lacks in Accounting 355 subject due to pressure of studies. Mary Jo used test banks as per the advice of her friend Samantha for securing good marks in exam. In order to rationalize this behavior, Mary Jo could say that test banks have been used for reference and thereby it helped to enhance her knowledge. As a result, this facilitated Mary Jo to perform better in exam through which her career would be improved.

Professional scenario

It has been seen from the given scenario that although supporting paper has been lost, Johnny has its electronic version on computer hard drive. As per direction of the manager, Johnny reprinted this paper and hence no explanations regarding this work papers have been provided during the time of doing inclusion in final file (Hassard and Pym 2012). Additionally, Johnny has kept original signature of client but true insertion date is not provided in this copy. In this circumstance, Johnny might have informed top management of ABC Company regarding the manager direction. Thus, individual might have restricted Johnny in manipulating revised document in order to maintain personal and professional integrity.

Student scenario

In this situation, Mary Jo should have avoided test banks and also would have recommended Samantha to refrain from using this while preparing for final exam. Thus, this act will assure ethical integrity of both student and the University.

Professional scenario

After this action of Johnny has been exposed, Johnny would have kept silence because of following reasons-

• Johnny has acted as per the direction of the manager of ABC company since this would assure personal interest (Cameron and O’Leary 2015)
• Manipulations has been done in disclosure of this vital item without giving any justification for late addition in file
• Johnny has met this enterprise clients that violated principle of confidential information and independence of this enterprise

Therefore, in this case, Johnny would have informed the ABC company’s management about the managers directions that he received and also provide correct information to PCAOB members.

Student scenario

After disclosing the Mary Jo’s act, the reasons that she would have kept silence consists of following-

• Mary Jo has used test banks that the students studying in this University is not supposed to use
• Wrong certification has been given that Mary Jo complied with the norms as well as regulations of the university
• The confession could have adverse affect on Samantha’s career progress, who is Mary Jo’s friend (Cullingford and Blewitt 2015)

In this situation, Mary Jo should have refrained from using test banks and thus could have suggested Samantha to avoid using this by reminding her rules and regulations of the University.

Brewer, P.C., Sorensen, J.E. and Stout, D.E., 2014. The future of accounting education: Addressing the competency crisis. Strategic Finance, 96(2), pp.29-38.

Cameron, R.A. and O’Leary, C., 2015. Improving ethical attitudes or simply teaching ethical codes? The reality of accounting ethics education. Accounting Education, 24(4), pp.275-290.

Cullingford, C. and Blewitt, J., 2013. The sustainability curriculum: The challenge for higher education. Routledge.

Dellaportas, S., Kanapathippillai, S., Khan, A. and Leung, P., 2014. Ethics education in the Australian accounting curriculum: A longitudinal study examining barriers and enablers. Accounting Education, 23(4), pp.362-382.

Fiolleau, K. and Kaplan, S.E., 2017. Recognizing ethical issues: An examination of practicing industry accountants and accounting students. Journal of Business Ethics, 142(2), pp.259-276.

Hassard, J. and Pym, D. eds., 2012. The theory and philosophy of organizations: critical issues and new perspectives. Routledge.

Madsen, P.E., 2014. Has the quality of accounting education declined?. The Accounting Review, 90(3), pp.1115-1147.

Rankin, M., Ferlauto, K., McGowan, S.C. and Stanton, P.A., 2012. Contemporary issues in accounting. Milton, Australia: Wiley.

Scott, W.R., 2015. Financial accounting theory (Vol. 2, No. 0, p. 0). Prentice Hall.

Tormo-Carbó, G., Seguí-Mas, E. and Oltra, V., 2016. Accounting ethics in unfriendly environments: The educational challenge. Journal of business ethics, 135(1), pp.161-175.

 

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