What would You Think of a Company’s Ethics if It Changed Accounting Methods Every Year?


SKU: ACC000561 Category:
  • Average Cost Method
  • FIFO method
  • LIFO method



1.Read the following Ethical Issue

During 2012, Crop-Paper-Scissors, a craft store, changed to the LIFO method of accounting for inventory.  Suppose that during 2013, Crop-Paper-Scissors switches  back to the FIFO method and the following year switches back to LIFO again.

  1. What would you think of a company’s ethics if it changed accounting methods every year?
  2. What accounting principle would changing methods every year violate?
  3. Who can be harmed when a company changes its accounting methods too often?  How?


2.Compare and explain the differences between using FIFO, LIFO and average-cost methods.


3.Research the Sarbanes-Oxley Act on the internet and explain its origin  and how it relates to internal controls. Be specific in your post.


4.Mel O’Connor owns rental properties in Michigan.  Each property has a manager who collects rent, arranges for repairs, and runs advertisements in the local newspaper.  The property managers transfer cash to O’Conner monthly and prepare their own bank reconciliations.  The manager in Lansing has been stealing from the company.  To cover the theft, he understates the monthly bank reconciliation appears to balance.  O’Conner is currently putting his entire business up for sale.  In negotiating the sale of the business, O’Conner is showing the balance sheet to prospective buyers.

  1. Identify who, other than O’Conner, could be harmed by this theft.  In what ways could they be harmed?
  2. Discuss the role accounting plays in this situation.


5.Review the following article found at the NAU Library website, based on the article “Business Ethics and Stakeholder Analysis” by Kenneth E. Goodpaster.  Apply the “PASCALS” model to a specific business ethics case of your choosing. Identify the company and the issue as well as how you would follow the steps.


6.Review the article “Business Ethics and Stakeholder Analysis” by Kenneth E. Goodpaster, found at the NAU Library website.  This article discusses “The Stakeholder Paradox.” Define the stakeholder paradox and give an example of where this method could be used (search news websites for an example). Include the URL of your website in your discussion post.


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