Discussion Question
Cash in Hand Topic: Revenue Recognition/Misrepresentation ofFact by Client Characters: Heather Hunter, Senior in CPA firm“Buzz” Thompson, Owner/manager of Fashion First Sandy, part-timebookkeeper of Fashion First Author: Mary Brady Greenawalt,Associate Professor of Business Administration, The CitadelCo-author: Janine Cloutier, Virginia Tech
In addition to the usual mix of compilation, review, and auditclients for which Heather Hunt serves as a senior in a small officeof a regional CPA firm, she has been assigned a new client thatrecently engaged the firm. Fashion First, an incorporated retailoutlet, is a thriving local store. The business is run by a singleowner/manager, “Buzz” Thompson, who makes all major decisions. Thebusiness has not previously used the services of a CPA firm. Inaddition to preparation of financial statements, the CPA firm willhandle tax returns for the business. At her first visit to theclient’s office, Heather is introduced to Sandy, the part-timebookkeeper who is also a full-time accounting student at the localuniversity. At a subsequent meeting, Sandy confides to Heather thatshe found the job at the beginning of the semester after anextensive search. Sandy really needs the money to help finance hereducation, and feels lucky to have found a good-paying job duringthe current economic downturn. Feeling that Heather is someone shecan talk to and get advice from, Sandy describes a situation thathas been on her mind for some time now. Sandy’s concern relates tothe handling of sales revenues. When monies from sales revenues arecounted and deposited on a weekly basis, a chart is filled out withcategories carefully delineating the type of payment: cash, checks,American Express, or Visa/Mastercard. Sandy’s employer, afterdepositing the weekly total, brings this chart back with his ownwritten-in total of the actual amount deposited. After looking oversome of these weekly deposit chats, Sandy noticed that $500 cashwas missing from each deposit. After a more thorough inspection ofmonthly tax documents that “Buzz” Thompson has filled out, Sandynoticed that the reported monthly gross revenue was $2,000 lessthan what had been actually counted. The employer is the onlyperson handling the money after it has been counted. He is also theonly one to deposit the money. When Sandy asked Mr. Thompson aboutrevenue not being reported for tax purposes, he assured her thatevery dollar of income was reported on the tax forms. Furthermore,“Buzz” asserted, since Sandy wasn’t the person who signed theforms, she shouldn’t be concerned.
Questions: Explain your reasoning for each question in fulllength! What are the Ethical Issues? Who are the PrimaryStakeholders? What are the Possible Alternatives? What are theEthics of the Alternatives?
