Financial Reporting Of Tim O’Shea Samples †MyAssignmenthelp.com

Question: Discuss about the Financial Reporting Of Tim OShea. Answer: Main Ethical Issues Involved: Sharon Rock, working as the assistant accountant of the company Brady Industrial Products reviewed the financial statements of the company and discussed the same with the same with respective accountant of the company Tim OShea. Analysis of the financial statements reflected the fact that the company had acquired a loan with the Localtown Bank. As per the terms of the loan contract, the company was supposed to maintain a minimum current ratio of (1.2:1). However, examination of the pertinent figures in the financial statements revealed the fact that the current assets (without inclusion of inventories) and current liabilities of the firm was in actual fact standing at $1100000 and $1000000 respectively. This showed that the current ratio of the firm Brady Industrial Products stood at (1100000/1000000=1.1) that is lower than what is required as per the terms of the loan agreement. Sharon identified the issue and discussed on this specific matter with Tim OShea. However, Tim OShea decided to manipulate the financial data and falsely represent the same in the financial reports for meeting the terms of the loan agreement as there was dearth of time to correct the figures. According to Tim, the company could otherwise sell some of their inventories or else acquire some receivables to correct the current ratio of the firm. Instead, the accountant thought of representing the huge loan of amount $120000of the business that is in actual non-current receivable as current receivable. Thus, this act can be identified as an ethical issue that involves material misstatement. This can be stated as material misstatement as this misstatement of assets in the financial statement might affect the specific economic decision of the user particularly the loan provider (bank) in this case (Mali and Novak2016). The material misstatement is associated to false representation of financial information in the financial assertions of the firm Brady Industrial Products . This can be considered as an ethical issue as it involves fraudulent financial reporting that intentionally carried out for misleading the users of the information. As per AASB 1031 (materiality) para- 9, this overstatement/understatement of assets in the financial reports of the firm Brady Industrial Products can be referred to as material (Cameron 2014). This can be considered as material as the omission, misrepresentation or else non-disclosure of the specific information on current assets has the ability, both individually as collectively to affect the economic decisions of different users relying on the financial reports and can affect influence the accountability by the management else wise the governing unit of the entity (Mali and Novak2016). In this case, the concept of materiality also affects the way a specific item or else an aggregate of specific items is necessary to be recognized, enumerated or esle disclosed as per the Australian Accounting Standards Board. APESB 1 10 (Code of Ethics for Professional Accountants) declared by the Accounting and Professional Ethical Standards Board also states about the need for independent review of the financial statements that is essentially in this present business case (Sutherland 2017). References Cameron, R., 2014. Applying the Materiality Concept: The Case of Abnormal Items.CORPORATE OWNERSHIP CONTROL, p.428. Mali, S.S. and Novak, A., 2016, January. Assessments of the risks of material misstatement due to fraud. In5th International Conference Vallis Aurea: focus on Research and Innovation. Sutherland, D.W., 2017. Independent audit report.Newsmonth,37(3), p.19.