BYP1-6 Exercise

ACC/349
Jan 26, 2015

BYP1-6 Exercise A. Who are the stakeholders in this situation?
The stakeholders would include the President and Vice President of Robbin Industries, Wayne Terrago, Robbin Industries controller as well as shareholders, and creditors, specifically ones involved in the bond offering. Other stakeholders would be employees of the company-for if this advertising expense is reported as inventory, this can be classified as unethical by the SOX Act and is not acceptable in accordance with the GAAP to where the company can be in violation and have hefty fines which would affect the jobs of the present employees of the company. B. What are the ethical issues involved in this situation?
One issue is that the excessive advertising is being reported as inventory, or at least the President of the company and some of the board members are wanting it to be. In accordance with the SOX Act, managers must be able to verify all internal controls that ensure all financial reporting’s are accurate. If this is reported per the President’s recommendation then this is unethical.
Another issue is where others wanted the extensive advertising costs be classified as prepaid advertising and a current asset. This is not acceptable per GAAP and the company show that they have more assets than they have to make them look better on their financial statements for creditors and shareholders C. What would you do if you were Wayne Terrago?
This advertising was initially done to sell products that are slower moving. This scenario doesn’t state whether these products have already been in manufactured and are just sitting in inventory where job costs have already been credited to their production, and I am assuming this is so.
Mr. Terrago states that the advertising should be reported as a current expense according to the conservatism