Final Writing Assignment
Instructions: review the factual situation below, and write a brief essay applying the
assigned course materials to the situation. Be sure to indicate the source of any legal rule
that you use in evaluating the factual situation below.
Responses should be approximately 500 words and should use proper spelling, grammar,
and punctuation.
Accounting Misstatements
A multinational company, HK, Inc., directed that its employees in the procurement
department negotiate with materials suppliers, such that these suppliers were to make a
payment at the start of the contract to HK that represented a multi-year discount on the
supplies purchased by HK. HK’s Chief Financial Officer then pressured accounting staff to
recognize these initial payments as revenue in the fiscal year they were collected, thereby
increasing the gross profit of the company. In addition, the CFO pressured his accounting
staff to also represent on the financial statements that the cost of goods purchased under
these supplier contracts was lower than the invoices received from suppliers, on the
grounds that the initial payments received were an offset to the cost of goods. Over several
years, this led to misstatements on financial statements suggesting greater profitability for
the corporation.
Discuss the accounting ethics implications for an accountant licensed in Maryland, using
COMAR § 09.24.01.06. Be sure in your response to identify the specific paragraphs or
sections of the regulation that is related to your analysis. In addition, conduct your own
research on this type of financial misstatement and discuss the impact on licensed
accountants that go along with this type of financial reporting. Students should provide a
citation to a reliable source in the paper.