Question

Select all that apply which were the most serious infractions of ethical practice identified in the akers study? (check all that apply.)

o requesting deferred billing from the supplier
o increasing reserves for obsolescence
o accelerating recording of supplies expense
o burying scrap costs in other expenses
o accelerating delivery to customers
o increase the rate of returns forecasted on purchases

Answer 1

Some ethical infractions identified in the Akers study include burying scrap costs in other expenses, accelerating the recording of supplies expense, and increasing reserves for obsolescence. These practices misrepresent the company's actual financial condition and can lead to loss of trust and legal issues.

Step-by-step explanation:

The question posed pertains to a study by Akers that identified various ethical infractions in practice. Upon review of the options provided, not all of them necessarily equate to an ethical infraction. Each practice has different implications within business operations, and each must be considered within the context of ethical guidelines and accounting standards.

The most serious infractions of ethical practice from the provided list include:

• Burying scrap costs in other expenses: This is unethical because it intentionally misleads stakeholders by hiding the true nature of expenses, hence not reflecting the accurate financial condition of the company.
• Accelerating the recording of supplies expense: Reporting expenses earlier than they should be, this infraction manipulates earnings to meet targets or expectations, which again misrepresents the company's financial status.
• Increasing reserves for obsolescence: This could be considered an infraction if it is done to manipulate earnings, as overestimating reserves can be used to minimize profits or losses during a certain period, leading to inconsistency in financial reporting.

It is crucial for companies to adhere to ethical practices in order to maintain transparent and accurate financial reporting. Ethical infractions can lead to a host of negative consequences including financial misstatements, loss of stakeholder trust, and even legal repercussions. Providing deferred billing can be considered a gray area, as it might be employed as a strategy for cash flow management, but could also be used unethically to manipulate financial statements. Similarly, accelerating delivery to customers and increasing the forecasted rate of returns on purchases are not inherently unethical but could become so depending on the intent and outcome of these actions.

Answer 2

The most serious infractions identified in the Akers study are increasing reserves for obsolescence, accelerating the recording of supplies expense, and burying scrap costs in other expenses. These practices are considered serious as they intentionally misrepresent a company's financial position. Options 1, 2, and 3 are the correct answer.

Step-by-step explanation:

The question pertains to ethical practices in accounting and finance, as identified in the Akers study. In this context, the most serious infractions would involve actions that deliberately misrepresent the financial statements or deceive stakeholders about the true financial position of a company. Such actions could include:

• Increasing reserves for obsolescence: This practice may overstate expenses and understates current profits to manipulate future earnings.
• Accelerating recording of supplies expense: Recognizing expenses earlier than when they are actually incurred would understate current profits, potentially for the goal of smoothing earnings.
• Burying scrap costs in other expenses: This action hides losses and artificially inflates profit figures by placing scrap costs into broader expense categories.

These infractions are considered serious because they involve the intentional misstatement of financial results, potentially leading to fraud. Requesting deferred billing from the supplier, accelerating delivery to customers, and increasing the rate of return forecasted on purchases, while potentially problematics, are generally not as serious in terms of ethical infractions unless they are also part of a strategy to mislead or defraud stakeholders.

In summary, the correct options that reflect the most serious infractions identified in the Akers study are:

1. Increasing reserves for obsolescence.
2. Accelerating recording of supplies expense.
3. Burying scrap costs in other expenses.