Managerial Accounting

Week 1 DQ Response

Ananta Raj

Westcliff University

Managerial Accounting

The affected parties by this audit and the proposed plan of fees are both internal and external stakeholders. External parties include shareholders, lenders and regulators who are responsible for validation of financial accountability of the firm. The actual decision-making of the internal operations of the organization and lead managers of the departments still rely on the integrity of financial reporting (Wild & Shaw, 2019). The overarching ethical aspect in this case is the risk brought by a conflict of interest.

An agreement which ascertains payment only on reported profits could impair the probity and fancy of Tana Thorne’s audit. One concern is that she may prioritize the financial interests of the firm paying her audit fee over conducting a fair and thorough evaluation of the company. I do not approve of the ordinance, board or audit fee that Thorne should agree to, establishing any kind of link between reward and reported profits, in its turn is likely to cause “a conflict of interest” and often put professional ethics before possible financial benefits (Gendron et al., 2006). Ethics-based criteria guiding this idea are: auditors need to maintain independence, integrity and transparency so that trust will be maintained and confidence in financial statements will be preserved.

References

Gendron, Y., Suddaby, R., & Lam, H. (2006). An Examination of the Ethical Commitment of Professional Accountants to Auditor Independence. Journal of Business Ethics, 64(2),

169–193. http://www.jstor.org/stable/25123741

Wild, J., & Shaw, K. (2019). (8th ed.). Financial and managerial accounting: Information for decisions. McGraw-Hill