Dialogue Discussion Forum for Period 4
Dialogue Post Week 7
The Case:
The Waldorf Manufacturing Company has an incentive plan that rewards top management with a bonus if a yearly operating income goal is met. In 2020, the company’s chief financial officer, Josiah Sawgrass, faces a tough year with bleak prospects for reaching the goal. To ensure the bonuses are secured, Josiah decides to recognize a $250,000 sale in December 2020, even though the widgets will not be shipped until January 5, 2021. The company’s normal procedure is to recognize revenue when the customer receives the goods, which is an FOB destination term.
The Dialogue Question:
Proverbs 16:18 says, “Pride goes before destruction, a haughty spirit before a fall.” This spiritual principle of humility is essential in financial reporting, where pride can lead to misrepresentation and destructive outcomes.
In the case of Josiah Sawgrass, discuss how a lack of humility might lead to earnings management. How does the act of prematurely recognizing revenue demonstrate a focus on self-interest rather than faithful stewardship? Drawing from the biblical principle of humility, explain why it is crucial for an accountant to operate with a humble spirit, prioritizing truth and transparency over personal gain or the appeasement of others.
Dialogue Post Week 8
The Case:
Lucas McKay, an audit manager, compromises his professional integrity and judgment during an audit of a client named Healthy Living. He allows the client to prematurely record a transaction to avoid reporting a loss. He also accepts the client’s position not to write down a $200,000 impairment on fixed assets, reasoning that the impairment is temporary. Additionally, Lucas removes a senior auditor, Anna Dickson, from the engagement after a personal relationship with her ends poorly. Lucas’s decisions are influenced by his fear of losing the client’s engagement and his personal conflicts.
The Dialogue Question:
The Bible calls for integrity in all our dealings, stating in Proverbs 11:3, “The integrity of the upright guides them, but the unfaithful are destroyed by their duplicity.” This spiritual principle of integrity is foundational to the accounting profession.
In the case of Lucas McKay, describe how his decisions regarding the audit reflect a lack of professional integrity. Explain how the pressure from the client and his personal life influenced his judgment, violating the principles of objectivity and due care. Discuss how Lucas’s actions demonstrate a failure to be guided by integrity, and how the principle of integrity is a non-negotiable requirement for an auditor to fulfill their role faithfully.
Note: For each discussion period, you are required to create 2 Original posts (200 words or fewer each). Each post must include a minimum of two academic references
Requirements: 2 posts Each post no longer than 200 words
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