Abc Corporation Essay

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ABC Corporation Case Ashley White Hudson; Kim Crayton; Brenda Fountain; Latisha Blackmon ETH 376 May 28th, 2012 Juan C. Vargas ABC Corporation Case ABC Corporation is a large publically held corporation that is in the process of being audited by external auditors from the CPA firm, Green & Associates. Issues relating to audit opinions, internal controls, valuation methods, compliance with SOX, GAAS, and GAAP rules and ethical points involving ABC Corporation and Green & Associates will be discussed. ABC Corporation was utilizing the FIFO inventory method for the current year to declare a lower gross profit which reflects a lower net income in order to pay lower taxes and increase their cash flow. FIFO method is used when a company uses old inventory first (First In First Out) so that they can prevent the inventory from being obsolescence and/or be sold at a stable price. By using this method the income statement shows a higher income due to the lower value of the cost of goods sold. The balance sheet would also show a higher value for the inventory that is on hand. ABC Company wanted to show that their expenses were lower and their income was higher than what it actually was, resulting in a higher retained earnings value at the end of the period. To the public, it would look as though the company is thriving and paying out larger dividends to stockholders. Stockholders may assume when reading the financial statements that they would be receiving a higher return each month or quarter when in reality that would not be the case especially if they are planning on switching to LIFO. It is unethical to make a huge financial decision based on only short term goals. The Sabarnes-Oxley act of two-thousand and twelve, contains 11 sections detailing rules and regulations for financial reporting. The SOX act section 404 requires that management of
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