Financial accounting 16th Edition by Jan Williams,Susan Haka,Mark Bettner ,Joseph Carcello

تمرين 6

Our Little Secret is a small manufacturer of swimsuits and other beach apparel.he company is closely held and has no external reporting obligations, other than payroll reports and income tax returns.he company's accounting system is grossly inadequate.ccounting records are maintained by clerical employees with little knowledge of accounting and with many other job responsibilities.anagement has decided that the company must hire a competent controller, who can establish and oversee an adequate accounting system.
Amy Lee, CPA, has applied for this position.uring a recent interview, Dean Frost, the company's director of personnel, said, "Amy, the job is yours.ut you should know that we have a big inventory problem here.
"For some time now, it appears that we have been understating our ending inventory in income tax returns.o one knows when this all got started, or who was responsible.e never even counted our inventory until a few months ago.ut the problem is pretty big.n our latest tax return-that's for 2010-we listed inventory at only about half its actual cost.hat's an understatement of, maybe, $400,000.
"We don't know what to do.e sure don't want a big scandal-tax evasion, and all that.aybe the best thing is to continue understating inventory by the same amount as we did in 2014.hat way, taxable income will be correctly stated in future years.nyway, this is just something I thought you should know about."
Instructions
a.riefly identify the ethical issues raised for Lee by Frost's disclosure.
b.rom Lee's perspective, evaluate the possible solution proposed by Frost.
c.dentify and discuss the alternative ethical courses of action that are open to Lee.