Ethics

[Selim]

Chiara is a member in industry who works for Italio Industries, Inc., an importer of fine Italian handbags. During the preparation of the companys annual audited financial statements for the
year ended December 31, 20X2, a disagreement on the application of certain accounting principles ensued between Chiara and her supervisor. Rather than being associated with the
situation, Chiara immediately decides to resign without taking any further action. Which of the following statements is true regarding Chiara:

Chiara is fully relieved of all responsibilities that exist regarding this situation immediately upon her resignation.
Chiara may not be fully relieved of responsibilities that exist regarding this situation upon her resignation.
Chiara must report the situation to the AICPA upon her resignation but is fully relieved of all other responsibilities that might exist regarding this situation.
None of the above.

[jno]

this is a British-based website so you may not have much luck getting an answer about American accounting practices. But if the statement hasn't yet been prepared, it's hard to see what she might be accused of; surely her supervisor has been briefed and is in a position to correct anything the company might deem to be wrong before matters are taken any further?

[jno]

just realised this isn't necessarily an American question but my comments are the same, wherever, but they may be affected by local regulatlions or practices.

[bobbinwales]

I think I can work this out but as your studying the course and its your coursework am wondering what your thoughts are first. ???

[Hymie]

To assist you with the answer, as someone working for a FTSE100 company with a mandatory ethics code applicable to all employees, imagine I am Chiara.

The disagreement on accounting principles between me and my supervisor is that I believe 50% of the company’s profits are to be paid directly into my personal bank account.

Under option 1; on resignation that it the end of the matter, and I can keep the 50% of the company profits.

Under option 2; on resignation they might have a right to sue me for the money I stole and report that theft to the police.

Under option 3; on resignation, after reporting the matter to AICPA (whoever they are), that is the end of the matter, and I can keep the 50% of the company profits.

Option 4; none of the above.