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9. (L03) Consider the four types of accountants, the destructive accountant, the good-hearted accountant, the opportunistic accountant, and the virtuous accountant. Explain which accountant made
9. (L03) Consider the four types of accountants, the destructive accountant, the good-hearted accountant, the opportunistic accountant, and the virtuous accountant. Explain which accountant made the following decisions and describe how these accountants might become a virtuous accountant if they are not. a. Cedric is an auditor for Stuart LLP working on the audit of Pedersen Enterprises. He knows that Pedersen Enterprises needs a bank loan to continue in operations the following year. Pedersen Enterprises is a small landscape company and he knows how hard the employees have 4 ACCOUNTING ETHICS worked to build the business. If they do not get a loan, they will have to close. This means that he will lose an audit client. Cedric decides to allow the company to recognize revenue early for contracts that will be done after year-end, so the company appears to be more profitable. The early recognition of revenue should allow Pedersen Enterprises to receive the loan they need to stay in business. b. Dominyka is an accountant for Scott Company. She receives stock options from the company as part of her salary. She benefits from the stock options when the stock price increases, because she can then sell the options for more than they cost at the grant date. She knows that the company should include an estimate of bad debt expense on the financial statements, but, if they do so, net income will decline, and the price of company stock is likely to fall. If this happens her stock options are worthless. She decides to prepare the financial statements without the reduction for bad debt expense, to report net income higher than the previous year. This should increase the stock price and then she can exercise her options. c. Fumika is an accountant for BCS Inc. She is one of the executives who receives a bonus if net income increases by 6%. She does not under- stand the accounting rules for recognizing revenue related to leased office space, but she believes that all revenue recognized during the life of the lease should be recognized in the current year, even though the length of each lease is five years. She knows the accounting rules per- mit the company to recognize revenue when the service is provided and her company allowed the clients leasing the office space to begin using it immediately. facruntants the destructive accountant the
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