Merced Home Products Case Study
argumentative Essay
1199 words
Merced Home Products-Accounting Ethics Case Wayne A Shaker OMGT 308-001.2014,SP, Financial and Managerial Accounting Instructor: Paul H. Robinson, JD, CPA Most profit making companies understand conducting business within an ethical reporting framework is the proper way to report quarterly results. Often accounting managers are given opportunities to exercise judgment in financial reporting, using their knowledge about the business to improve the effectiveness of financial statements. However, accounting professionals need to perform their job tasks in accordance with laws, regulations, and technical standards while supplying information that is accurate, clear, concise, and timely. At the same time, managers need to be free from pecuniary anxieties, and disclose all relevant information that could influence an intended recipients understanding of the analyses or reports. However, when managers have incentives to produce positive results, profit management can occur while misleading those who review the company’s financial statements. In the case of Merced Home Products Inc., recently hired controller Stacy Cummins has stumbled upon an accounting procedure causing her great concern. Being a new controller, Stacy reviewed the financial statements of the Home Security division discovering profits improved each quarter until a year end climax with outstanding performance. According to the assistant controller, the standard costs had been modified by Vice President, Preston Lansing to reflect positive earnings as the fiscal year progressed. Upon further investigation, Ms. Cummins discovered the president of the Merced Home Products was aware of the reporting using questionable standards and had chosen not to bother Pres... ... middle of paper ... ...ose developed by the Institute of Management Accountants ("Ima," n.d.). The guidelines for ethical behavior cover professional competence, confidentiality, personal integrity, for individuals disclosing financial information. Of course, ethical behavior in reporting is critical to establish creditability to any company to infuluence growth and outside investment. In the end, ethical conduct of the individuals reporting results is essential for maintaining a solid reputation and support continued success. References Brewer, P. C., & Garrison, R. H. (2013). Introduction to managerial accounting (6th ed.). New York: McGraw-Hill/Irwin. Federal Securities Laws. (2002). Retrieved April 29, 2014, from https://www.sec.gov/about/laws.shtml#sox2002 Ima. (n.d.). Retrieved April 29, 2014, from http://www.imanet.org/resources_and_publications/EthicsCenter.aspx
In this essay, the author
- Explains that profit-making companies understand conducting business within an ethical reporting framework is the proper way to report quarterly results. accounting professionals need to perform their job tasks in accordance with laws, regulations, and technical standards.
- Explains how stacy cummins stumbled upon an accounting procedure causing her great concern. she reviewed the financial statements of the home security division discovering profits improved each quarter until a year end climax.
- Explains that preston lansing, vice president in charge of the home security division, has been allowed to inappropriately manage profits throughout the year.
- Explains that profit-making companies understand conducting business within an ethical reporting framework is the proper way to report quarterly results. accounting professionals need to perform their job tasks in accordance with laws, regulations, and technical standards.
- Explains how stacy cummins stumbled upon an accounting procedure causing her great concern. she reviewed the financial statements of the home security division discovering profits improved each quarter until a year end climax.
- Explains that preston lansing, vice president in charge of the home security division, has been allowed to inappropriately manage profits throughout the year.
- Explains that standard costing substitutes an expected cost in the accounting records, and then periodically records variances that are the difference between the expected and actual costs.
- Explains that standard costs may be set too high in the beginning of the year and are gradually set lower as year progresses. if mr. preston lansing is not communicating variances to accounting on a timely basis, it prevents users of financial statements from getting an accurate picture of quarterly profit.
- Argues that if the home security division followed a consistent cost standard approach, they would be provided benchmarks to assess individual performance and embrace continual improvement.
- Argues that stacy cummins should speak with the chief financial officer (cfo) about her concern. she should suggest creating an operational and accounting management team to review standard costs of each division before the next fiscal year.
- Recommends stacy create an accounting governance committee with the support of the cfo to ensure compliance with sarbanes-oxley act of 2002.
- Advises stacy to discuss business ethics with an impartial advisor or legal counsel if she does not receive support from her cfo or accounting manager. if the board of directors follows ethics guidelines, they will support ms.
- Explains that managers should exercise considerable care when dealing with financial estimations and discernments. a business shows creditability by following a disciplined process with standards such as those developed by the institute of management accountants.
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- Explains berenbeim, r. e., and reed, b. (2011). the business of social responsibility.
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