1. Why study accounting ethics? Developing a rationale for accounting ethics in an undergraduate or graduate curriculum. Decision making in the context of accounting rules and standards. What is accounting ethics? Developing a model for ethical decision making. 2. Ethical decision making in the context of particular accounting decisions. Timely posting of journal entries. Cash salary payments. Using year-end adjusting entries to enhance net income. Delaying expense entries. Ethical dilemmas associated with revenue recognition issues. Using accounting changes to alter net income. Ethical issues associated with non-profit accounting. Internal control problems. Ethical issues associated with debt covenants and loan defaults. Earnings manipulations using estimates to make net income look better. Ethical issues associated with income smoothing. Conflict of interest problems for corporate board of directors. Ethical issues associated with asset classifications (short-term vs long-term). Accounts receivable write-offs. Ethical issues associated with cash, accounts receivable valuation, inventory valuation, accounting for fixed assets, repair and maintenance expenditures, accounting for research and development costs, warranty expense, contingent liabilities, and classification of liabilities. Ethical issues associated with debt covenants, stock options, executive compensation, "proforma" earnings, performance-based compensation plans, environmental liability disclosures, footnote disclosures and supplemental disclosure. Using the matching and conservatism principles to make accounting decisions. 3. Auditing. Ethical issues associated with internal control problems. Conflict of interest problems with corporate board of directors. Violations of the AICPA Professional Code of Conduct. What can the auditor learn from the recent company failures and reports of accounting problems (including Enron, Global Crossing, WorldCom, IBM, Sonali, Sunbeam, Boston Chicken)? What is the relationship between internal controls and audit risk. Financial statement disclosures and reporting issues. Independence in appearance. The impact of stock options and bonuses in earnings manipulations. The influence of financial analysts on quarterly reporting practices and the use of "proforma" earnings in press releases. Earnings manipulations to meet management expectations. Identifying red flags, reviewing estimates and assessing risk properly. Violations of the professional code of conduct. What is the role of professional skepticism in the audit process? What are recurring nonrecurring charges? What does it mean to say the accounting treatment is "defensible"? The SEC has stated that adherence to the letter of accounting rules may no longer be enough. Should accounting be referred to as creative? How do you determine if the information disclosed to outside users communicates the underlying economic reality of the transaction? The effects of client pressure on audit decisions. A partner was described as a "nice guy" who would not want to disagree during a discussion. Is this an appropriate description for a partner?
