Question

In: Accounting

The Institute of Managerial Accountants (IMA) has developed a set of standards to be followed when...

The Institute of Managerial Accountants (IMA) has developed a set of standards to be followed when faced with Ethical challenges. Your company has shown a weak financial condition and in order to ensure they can receive a large contract, you have been asked to record two orders, and bill the customer in December, even though the order will not be shipped until in January.

  1. Using the IMA standards, explain the ethical areas which are being violated.
  2. Explain the accounting principle(s) which are being violated.
  3. Explain how you could resolve this issue ethically.

Solutions

Expert Solution

The IMA Standards that are violated are 1.honesty in reporting

2.fairness in accounts 3.objectivity (differed) 4.responsibilty(against to ethical requirements)

Accounting Principles that have been violated are

1. Conservatism principle

2. Accural principle

3. Reliability principle

4. Revenue recognition principle

5.time period principle

To resolve this issue ethically, under go internal reconstruction of assets and liabilities , present forecasted or projected financial statements including the above stated 2 orders so that the company can understand the importance of their order in accordance with generally accepted accounting Principles so as to receive the large orders next year by increasing reliability .


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