7-1-

The following statement consists in reasoning (fallacies). Which fallacies are illustrated here? (Some statements may illustrate more than one fallacy.)

1. Ever since she changed accountants, the profits in her business have increased. Clearly the new accountant knows how to cook the books.
2. Give them an inch and they'll take a mile.
3. Either we redesign all our accounting information systems or we might as well close down the business.
4. Don't listen to him. He's just a nerdy, detail-obsessed accountant.
5. Three out of four accountants agree: The Daily Balance Sheet is the best source of financial news.
6. We don't need more public transportation in our city. Everyone in my office agrees they'd rather drive their own cars.
7. We've used Biddy and Bully as our firms legal firm for four generations. Even though their work has become unsatisfactory, I wouldn't want to change firms.
8. We shouldn't hire Jim Blankenship. He's from Hick City, and everybody knows people from there are just a bunch of ignorant buffoons.

7-5-

Some people would argue that historical cost should no longer be used in accounting because they are not relevant. Others argue that departing from historical cost introduces too much subjectivity into accounting. With a brief memo for Elizabeth Jansens, the managing partner of your firm. Ms. Jansen will use the memo to prepare a presentation on this topic for the local chapter of a professional accounting organization. Provide a defense of both points of view and explain why the FASB has chosen to depart from historical costs and many of its accounting standards.

7-6-

Some have suggested eliminating the provision of rule 203 of the AICPA's professional ethics that permits non-conformance with GA AP if, in the opinion of the CPA, following GAAP would result in misleading financial statements. Thoroughly discuss the pros and cons of eliminating this provision of rule 203 summarize these arguments in a briefing memo to the managing partner of your CPA firm, Elaine Morgan.