ACT461 Week 7 Case Study

Create a 4-page paper based on the “Analytical Model for Ethical Decision Making”. Please see attached requirements.

As an accountant/CPA, we are held to a very high degree as a trusted profession. We
are servants to our companies, investors, and all of the general public.
https://ethicallyspeaking.libsyn.com/ep-42-part-5-back-to-basics-integrity-objectivityand-the-conceptual-frameworkLinks to an external site.
In the above AICPA produced Podcast, Lewis Sharpstone notes “Accounting is a high
calling, …it is our self regulation and ethical standards particularly in this area of
integrity and objectivity that is one of the cornerstones that enable us to serve the
public”.
Business Scenario:
You are working as the controller of a small clothing manufacturing business in the
Midwest, DownHome Outerwear, Inc. DownHome uses a FIFO inventory valuation
system. On Dec 31, 2021, ending inventories were determined to be $5.3 million based
on physical counts. On Jan 20,2022 you discover an error was made in the physical
counts and the actual ending inventory balance should be $4.6 million.
DownHome’s major investors require audited financial statements each year. As of Jan
16, the financial statements have been audited by a local CPA firm which did not
discover the error after reviewing the financial statements. They will be issuing an
unqualified opinion on Jan 26 on the original financial results. Financial Statements
have not been issued as of Jan 20 when the error was discovered.
Your bonus and several key management employee bonus pools are tied to profit
sharing plans based on the business results and you are unsure how this error will
impact those results.
What do you do? Where do you go for guidance?
Within a maximum 4-page paper, describe your final decision based on the “Analytical
Model for Ethical Decision Making” listed above. Your analysis should include a
definition of ethics, how it impacts professionalism in the Accounting Field, and how a
violation of ethics impacts business society from an financial/fiduciary
perspective. Include the US GAAP and Code of Professional Conduct requirements
which apply to this situation. What are the steps that you are required to take? What
happens if you do not follow the guidance in the Codes? (Include professional,
business, personal, and business societal impacts in your analysis).
Ethical Model for Decision Making (Spiceland, Intermediate Accounting Text 10e).
1) Determine the facts of the situation. This involves determining the who, what, where,
when, and how.
2) Identify the ethical issues and the stakeholders. Stakeholders might include
shareholders, creditors, management, employees and the community.
3) Identify the values related to the situation, For example, in some situation’s
confidentiality might be an important value that might conflict with the right to know.
4) Specify alternative courses of action.
5) Evaluate the courses of action specified in step 4 in terms of their consistency with
the values listed in step 3. This step may or may not lead you to your recommended
course of action.
6 )Identify the possible consequences of each course of action.
7) Make your decision and take any indicated course of action.