Question

For each of the situations? listed, identify which of three principles? (integrity, objectivity and? independence, or due? care) from the AICPA Code of Professional Conduct that is violated. Assume all persons listed in the situations are members of the AICPA.? (Note: Refer to the AICPA Code of Professional? Conduct.

a.	?Mariah's company is switching to? FIFO, after using the LIFO method for several years. Mariah does not remember how to apply the FIFO? method, but is too busy to review the technique. She figures the auditors will catch anything she does wrong.
b.	Xun is the chief accountant for a furniture manufacturer. Two years? ago, Xun changed the? company's inventory method to FIFO. This? year, Xun is changing back to LIFO. The motivation for the changes is solely to manipulate net income.
c.	Eboni is an auditor at a public accounting firm. She is auditing one of her? firm's largest clients. Her aunt is the CEO of this client. Eboni does not mention the relationship to her manager.
d.	A fire at? Sean's company has destroyed most of the accounting records and a significant amount of inventory. He finds some partial records to be able to reconstruct most of the financial records using the gross profit method. He has the opportunity to substitute a higher number for the quantity on hand so that insurance will pay the company more than the actual loss. He knows that the quantity on hand was much lower than he reports on the insurance claim? form, but rationalizes that his company has paid insurance premiums for many years.

Answer 1

a. Mariah's company is switching to FIFO, after using the LIFO method for several years. Mariah does not remember how to apply the FIFO method, but is too busy to review the technique. She figures the auditors will catch anything she does wrong. - Due care prinicple.

Due care principle: Due care requires a member to discharge professional responsibilities with competence and diligence. Here Mariah lacks the compentence in applying the FIFO method.

b. Xun is the chief accountant for a furniture manufacturer. Two years ago, Xun changed the company's inventory method to FIFO. This year, Xun is changing back to LIFO. The motivation for the changes is solely to manipulate net income. -Integrity principle

Integrity Principle: Members should perform all professional responsibilities with the highest sense of integrity. Integrity requires a member to be, among other things, honest. Here in this case the intigrity principle has been compromised for the personal gain and advantage.

c. Eboni is an auditor at a public accounting firm. She is auditing one of her? firm's largest clients. Her aunt is the CEO of this client. Eboni does not mention the relationship to her manager. -Integrity, Objectivity and Independence.

Objectivity and Independence: A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities.

d. A fire at? Sean's company has destroyed most of the accounting records and a significant amount of inventory. He finds some partial records to be able to reconstruct most of the financial records using the gross profit method. He has the opportunity to substitute a higher number for the quantity on hand so that insurance will pay the company more than the actual loss. He knows that the quantity on hand was much lower than he reports on the insurance claim? form, but rationalizes that his company has paid insurance premiums for many years. -Integrity Principle

Integrity Principle: Members should perform all professional responsibilities with the highest sense of integrity. Integrity requires a member to be, among other things, honest. Here in this case the intigrity principle has been compromised for the personal gain and advantage.