Ethics Case #1 Steinbach & Sons is a landscaping company located in Beverly Hills. The company’s net income decreased sharply during 2017. Mort Steinbach owner and manager of the company anticipates the need for a bank loan in 2018. Late in 2017 Steinbach instructs the company’s accountant to record $200 000 of service revenue for landscape services that will not be performed until January 2018 (note that no payment has been received for any of that work). Steinbach also tells the accountant not to make the following adjusting entries on December 31 2017: Salaries owed to employees $90 000 Prepaid insurance that has expired $15 000 Depreciation on equipment $75 000 (adapted from Horngren’s Financial & Managerial Accounting: The Financial Chapters 4e Pearson Publishing p. 204) 1. What impact(s) will these actions have on the company’s financial statements? Be sure to discuss the balance sheet and the income statement separately unethical behavior is discovered it will damage the company’s reputation and ruin its trust on the company’s stakeholders. Other parties will avoid doing businesses with the company. c. Suppliers The suppliers normally assess the credit worthiness of the company before they make a decision on supplying their goods on credit. The misleading information can be disastrous to them of the financial health of the company will not enhance their goods to be paid. 5. As a personal friend what advice would you give to the accountant who works for Steinbach? The accountant must adhere to the fundamental principles of integrity objectivity confidentiality professional behavior confidential intelligence and due care. The accountant should promote an ethical climate by acting responsibly. This will eliminate fines penalties and being blacklisted. The professional should not yield to the pressures of management but report the true financial statement of the company all the time. [...]
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