Question
Entity A has inventories at the end of its accounting year amounting to RM3,200,000. Due to the downturn in the economic environment, the net realizable
Entity A has inventories at the end of its accounting year amounting to RM3,200,000. Due to the downturn in the economic environment, the net realizable value of the inventories is RM2,920,000. The managers are concerned with maintaining a steady earnings growtn for the entity. The accountant has been requested to ignore the net realizable value as the managers expect the value to be subjective and recovered once the economic environment improves. Required: (a) Comment if there is any creative accounting involved in the scenario above with an appropriate explanation to support your answer. (b) Explain whether there are any ethical implications arising from the situation.
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