Case Study On Accounting

A Faculty Budget

A Faculty Budget
The main demand of the accounting profession for the accountants is to produce the information as per the ethical, legal and the guidance of the regulatory framework. The accounting information for the internal use of the organization plays an important role in the profitability and the direction of the business. Therefore, it is the responsibility of the accountants to produce relevant and best estimated budgets or estimates for the management of the business.
In the current scenario, the ethical issues arise in the making of a budget are as follows. Jackson Daniel is a junior accountant who graduated from the university two years ago. According to the scenario, it is not ethical to grant an approval of the budget prepared by the junior staff member. The safeguard for this ethical threat is, to take an independent review from the experience accountant in the business. For example, the reviews from the sales department and the reviews from the marketing department are the best evidence to match the findings of Jackson Daniel.
Another ethical issue or threat is that the Jackson Daniel did not applied the proper techniques of budgeting. Jackson only applied 25% increment on the sales of year 2010 and present the budget for next year. This ethical issue is damaging the threat of professional due care of the accountant towards the information compiled by them. It is very important for the accountants to apply all the relevant and authenticated methods of budgeting to make sure that the best possible information is provided. However, in the current case, Jackson Daniel ignored the past data and the future estimates. Moreover, it was the not a professional behavior of the Jackson to not apply other budgeting techniques.
One of the main ethical aspect in current scenario is that the Jackson Daniel did not revise his wrong findings. Moreover, it was in his knowledge about the production capacity and the storage capability of the business and he presents the wrong expected sales for the year 2011. In this case the Jackson Daniel must consult his supervisor instead of discussing it with his friend. Jackson’s friend Jon is also not an expert of budgeting and new to the industry. Jon suggested that Jackson must as production department to hire more staff to satisfy the requirement of budgets. In these circumstances instead of discussing the issue with the Jon, by consulting the supervisor or senior staff member, Jackson Daniel can get a proper advice on the revision of the budget on a timely basis.
It is the ethical duty of the accountant to disclose and correct any misstatements in the accounting for internal as well as external information about the business on a timely basis. The effect of wrong budgets will reflect on the financial statements and the external auditor will inquire with Jackson on the basis of increment in the budgets. Therefore, it is the ethical duty of Jackson to disclose the errors or mistakes in the budgets to the proper level of management and revise it before the actual production or any further decision making.
The code of ethics for the CPA are very strict and straight forward to follow. The code says that the CPA, accountants must follow the relevant code of ethics, local laws and the relevant regulatory framework in practice and compilation of business financial statements. It is the ethical duty of the accountant to provide the professional and truthful services to their employees and the stakeholders as per the relevant and applicable regulations. However, the code of ethics in CPA explains five major responsibilities of the accountant towards their actual practice of accounting. Integrity is the first and key element of the CPA accountant which suggest that the account must give and produce the accounting statement as per the rules and ethics with honesty. Accountants must not be biased and behave as a neutral individual to protect the name of their accountancy body.
The objectivity is the second quality of the CPA accountant which says that accountants must maintain objectivity and keep themselves separate from the self-interest threats. The certified accountants can provide different services to their clients on the basis of their knowledge and expertise. However, it is very important that the objectivity of the accountant must not get harmed. For example, if the CPA are providing the tax consultancy services to the business, then it is recommended that the independent audit partner must conduct the audit services for the same business. Similarly, the knowledge of the accountancy is another important aspect of CPA accountant and it is important for the accountant to implement the knowledge of the accounting standards (GAAP) properly in the compilation of accounting records.