OtherPapers.com - Other Term Papers and Free Essays
Search

Budgetary Slack

Essay by   •  March 6, 2013  •  Essay  •  855 Words (4 Pages)  •  2,273 Views

Essay Preview: Budgetary Slack

Report this essay
Page 1 of 4

Budgetary Slack (Minicase: ACCT-23)

This particular case refers to a cost accountant working in a manufacturing division of a large corporation, Jen, and the budgeting and standards supervisor and Jen's superior in the accounting department, Ron. Jen prepared a budget based upon the projected cost savings of the company, and Ron asked her to prepare budget that uses the current materials quantities, which puts slack into the budget for next year. Jen could do this by utilizing new procedures that have been developed by the division, which may reduce the costs of materials for some products. These procedures have not yet been reported to the company's headquarters, but if used, could potentially make the division "look good" and also provide a few bonuses for division personnel.

In this situation, Jen has a few options. For one, she could revise the budget as Ron asked, so that he and other employees can "look good" and earn extra money in bonuses. Secondly, Jen could not revise the budget and keep the conversation between her and Ron quiet. Thirdly, Jen could not revise the budget, but report the conversation between her and Ron to an upper level supervisor, so that they could be aware of what Ron was trying to get her to do and argue why it would be in the best interest to prepare the realistic budget.

I think that in this case, Jen should take the third option and not revise the budget and state her case to an upper level supervisor. Many accounting associations endorse honesty. For example, The Institute of Management Accountants, Inc. says that "each member has a responsibility to communicate information fairly and objectively." Therefore, managers and supervisors should uphold integrity within the organization as not to mislead anyone to think that a company is doing better than they really are because auditors will look for this type of information and will report it. Budgets affect a number of people and departments, and it would not be fair to misstate them in order to "look good" or earn an extra bonus. Therefore, adding budgetary slack would be unethical because it leads people to an unrealistic view of a company's performance. Certainly, the other options could be taken, but they would be unethical and could be caught by the auditor and further reported, which would put Jen into a lot of trouble.

Conflicting Clients (Minicase: ACCT-02)

This particular case refers to a first-year member of a CPA firm's management group, Jennifer Grace, and the CFO of Fantastic Developments, Inc., Tom Ward. While reviewing current-year audit papers of a bank, Jennifer noticed a discrepancy between the financial statements supporting a bank loan to another client and her personal knowledge of how that client is actually doing financially. This other client is Fantastic

...

...

Download as:   txt (4.9 Kb)   pdf (76.6 Kb)   docx (10.4 Kb)  
Continue for 3 more pages »
Only available on OtherPapers.com
Citation Generator

(2013, 03). Budgetary Slack. OtherPapers.com. Retrieved 03, 2013, from https://www.otherpapers.com/essay/Budgetary-Slack/43020.html

"Budgetary Slack" OtherPapers.com. 03 2013. 2013. 03 2013 <https://www.otherpapers.com/essay/Budgetary-Slack/43020.html>.

"Budgetary Slack." OtherPapers.com. OtherPapers.com, 03 2013. Web. 03 2013. <https://www.otherpapers.com/essay/Budgetary-Slack/43020.html>.

"Budgetary Slack." OtherPapers.com. 03, 2013. Accessed 03, 2013. https://www.otherpapers.com/essay/Budgetary-Slack/43020.html.