Alonso Saunden owns a small trinvices company that is expecting pain. The company has grown rapidly by offering liberal credit to its customer. Although it competitors require payment for services within 30 dades permite his customers to delay payment for up to 90 days. Saundecttone thereby lure time to fully lust the training that employees ive before they must pay for that training. Saunders guarantees faction 17a customer it happy the customer does not have to per unders works with imputable companies, provides top quality and encounters fied custom The long collection period, however, he created a cash flow problem Sounder 100.000 accounts receivable balance, but needs cash to pay current but He has recently noted loan prement with National Bank of Brighton County that should solve his cash flow problem. The lo agreement requires that Saunders pledge the counts receivable at collateral for the loan The bank agreed to loun Siden 20 percent of the receivablet balance, thereby giving him accenu 10 570.000 cach Sounder a satisfied with this agement because he estimateshe needs approximately 560.000 On the day unders was to execute the loan agreement, he heard armor this big customer experiencing financial problem and might declare bankruptcy. The customer owed Sanders 345.000 Saunders promptly called the customer's chief accountant and learned off the record that the rumor was true The accountant told Saunders that the company's net worth was negative and most of its were pledged in collateral for bank loan. In his opinion, under was likely to collect Page 105 the balance due. Soundermediate concerns the impact the circumstances would have this one with the bank Saunders as the direct write-off method to recoprite collectible account expense Removing the 545.000 recewable from the collateral pool would leave only $35.000 of receivables, reducing the wailable credit to 538.500 $35.000 X 070) Evento recognizing the uncollectible accounts expense would to adversely affect his income statement that the bank might further reduce the available credit by reducing the percentage of receivables allowed under the loan agreement Senden will have to test to the quality of the receivables at the date of the loan but reasons that since the information he obtained about the possible bankruptcy was off the record" he is under te obligation to recognize the collectible account experientil the movable is officulty uncollectible Required How income and assets affected by the decision to act on the bankruptcy information? b. Review the AICPA's Articles of Professional Conduct (see Chapter and comment on any of the standards that would be violated by the actions Saunders is contemplating c. How do the elements of the fraud triangle (ute Chapter 40 ply to this case? John Riley, a certified public accounts, has worked for the past eight years as a payroll clerk for Southeast Industries, small fibre manufacturing firm in the Northe John recently experienced unfortunate circumstances. His teenage son required major curpery and the medical tas not covered by Joe's insurance have financially trained John's John work hard and is a model employee. Although he received opular performance rates dining his first frw year with Southeast. John's wages have not increased in three years otsked his supervisor, Bill Jameson for a raise Bill agreed that one deserved a rate, but told him he could not currently approve one bese of shitha A disappointed Johantarned to his duties while the financial pressures in his life concord. Two wake. Larry Tyler, on assembly worker at Southwest get over a dispute with management. Johnconvenida John's duties included not Paper 161 ondy processing employen terminations but also appeaving timecards before paychecks were stoedd the stributing the paychecks to firm personel John decided to delay processing Tyler's teemination to forge timecards for Tyler for the one weeks, and to ch the checks. Since he distributed paychecks, to one would find out, and a reasoned that he was really entitled to the extra money way. In fact, no one did this move and John stopped the practice after three werk Regulied Does Joul cheie affect Souther's Dancer Explorer b. Review the AICPA's Articles of Professional Conduct and come to my of the standards that have been violated c Identify the three clements of ethical and criminal conduct recognised in the food triangle