ACC 201 Module 8 Accounting Ethics Discussion example

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This ACC 201 Module 8 discussion reply, shown in full, ends the course on a judgment call rather than a calculation. A bookkeeper at a composite landscaping company is asked by the owner to hold three December vendor invoices until January so that the year's profit clears a bank loan covenant. The post explains why that request misstates the financial statements, connects it to research on how common earnings management is and to the professional duties of integrity and objectivity, and proposes an honest alternative. The company is composite; the research and codes cited are real.

What this page holds

A full ACC 201 Module 8 discussion reply, roughly 340 words, analyzing a request to delay recording expenses to meet a loan covenant, explaining the accrual principle it violates, citing research on earnings management and proposing an honest path. Searches like "acc 201 module 8 assignment", "acc201 module 8 accounting ethics discussion" and "acc 201 module 8 example" land here.

The ACC 201 Module 8 example, in full

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Module Eight Discussion: Ethics and the Quality of Financial Reporting

Re: Three invoices in the drawer

My scenario is a composite landscaping company whose bank loan requires net income of at least 90,000 dollars a year. On December 30, the owner realizes the year will come in around 84,000 dollars and asks the bookkeeper to hold three December invoices from a fertilizer supplier, totaling 7,200 dollars, until January.

Holding the invoices would not change what happened. The fertilizer was delivered and used in December, so under the accrual basis the expense belongs to December whether or not the bill is entered. Leaving it out would overstate net income and understate liabilities by 7,200 dollars, and the statements would no longer be a faithful representation, which requires information to be complete and neutral (Financial Accounting Standards Board [FASB], 2018). Timing is not a gray area when the event has already occurred; it is simply an omission.

This kind of pressure is not rare. In a survey of chief financial officers of public companies, respondents estimated that about 20 percent of firms manage earnings to misrepresent their economic performance, and that in those firms roughly 10 percent of reported earnings is affected, with meeting targets and covenants among the leading motives (Dichev et al., 2013). Professional standards ask accountants to act with integrity and objectivity and not to subordinate their judgment to others (American Institute of Certified Public Accountants [AICPA], 2014).

The honest path is to record the invoices and help the owner talk to the bank early. Lenders often grant a waiver or amend a covenant for a borrower who explains a shortfall before the statements arrive, but rarely forgive one they discover afterward. If the owner still insists, the bookkeeper should put the concern in writing and, if necessary, decline to prepare statements she knows are misstated; that protects her and, in the long run, the company's credibility with its lender.

I will close with a question. Would your answer change if the owner offered to record the invoices in January with a note explaining the delay?

What this page is doingThe post identifies exactly what the request misstates, grounds the ethical judgment in the conceptual framework and professional code, and offers a practical alternative rather than only a refusal.
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References

American Institute of Certified Public Accountants. (2014). AICPA code of professional conduct. https://pub.aicpa.org/codeofconduct

Dichev, I. D., Graham, J. R., Harvey, C. R., & Rajgopal, S. (2013). Earnings quality: Evidence from the field. Journal of Accounting and Economics, 56(2-3), 1-33. https://doi.org/10.1016/j.jacceco.2013.05.004

Financial Accounting Standards Board. (2018). Conceptual framework for financial reporting: Chapter 1, the objective of general purpose financial reporting, and Chapter 3, qualitative characteristics of useful financial information (Statement of Financial Accounting Concepts No. 8). FASB.

How this ACC 201 Module 8 example is structured

The post presents the request, explains precisely what it would do to the statements, places it in the context of research on how often earnings are managed, and then turns to the professional response and a better alternative. It closes with a question asking classmates where they would draw the line.

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Send the ACC 201 Module 8 prompt with its rubric. A reply on ethics, reporting judgment or the closing topic your prompt names comes back within 24 to 48 hours; your first is free. The paper above is an original model document written by our desk, not a submitted student paper and not an official Southern New Hampshire University document.

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ACC 201 Module 8 questions, answered

What is ACC 201 Module 8 usually about?

In financial accounting, the last module often reviews the full accounting cycle and addresses ethics and the quality of financial reporting, including how estimates and timing decisions can be misused to manage earnings. Discussions may ask students to respond to an ethical dilemma.

What is earnings management?

Earnings management is the use of accounting choices or the timing of transactions to make reported earnings look different from the company's true performance, for example to meet a target or a loan covenant. It ranges from aggressive but legal judgments to outright misstatement.

What is a loan covenant?

A loan covenant is a condition in a loan agreement that the borrower must meet, such as maintaining a minimum level of profit, a maximum ratio of debt to equity or a minimum current ratio. Breaking a covenant can allow the lender to raise the interest rate or demand repayment.