ACC 349 Cost Accounting
| (a) | Who are the stakeholders in this situation?|
(b) | What are the ethical issues involved in this situation?| |
(c) | What would you do if you were Wayne Terrago?|
(a) The stakeholders in this situation would be the vice-president of finance, the president of Robbin Industries, Wayne Terrago, and the users of Robbin Industries’ financial statements. Each of these stakeholders will be affected by any choices Robbin Industries make that affect the company’s financial statements. These individuals each have something to lose by the company providing falsified or inaccurate financial statements.
(b) The ethical issues involved in this situation pertain to following accepted accounting principles. Violating the generally accepted accounting principles to satisfy a short-term personal or company would create misleading financial statements. This situation would therefore be unethical. Robbin Industries is jeopardizing itself by not properly reporting the advertising costs. As an operating company, they must understand the generally accepted accounting principles and adhere to them.
(c) Wayne Terrago should try to report the financial condition and results of operations fairly and in accordance with the generally accepted accounting principles. As controller, Wayne should inform management and understand what is acceptable according to the GAAP. Wayne Terrago should know where properly to report all financial expenses and income the company deals with. As controller it is part of his duty to express to the board the correct expensing of the advertising expense. He should know that advertising costs are generally expensed in the period in which they are incurred.