Question: 1) Joe Felan is the production manager at Utex Corporation. He was recently quoted as saying, "since management reports aren't subject to generally accepted accounting principles, and they aren't directly used by outside investors and creditors, it's really okay for managers to manipulate the reports as they see fit." Do you agree with Felan's statement? Explain in detail.
2) Many companies have established business codes of conduct that outline procedures for employees, suppliers, and customers to alert management about suspected accounting, internal control, or auditing problems. As discussed in this chapter, one potential violation of GAAP would be to capitalize period costs, inflating the value of inventory and understating the expenses on the income statement for the period. Coca-Cola Company provides a "Code of Business Conduct" that identifies the code and what constitutes a violation. Also provided are examples of what employees and others can do if they suspect ethics or fraud violations at Coca-Cola. Go to the above website and find the following information:
1. Identify the accounting-related components of the code.
2. Review the section titled "Administration of the Code." Identify the steps that an employee would take if he or she wanted to report capitalization of period costs by a bottling plant manager.
3. Identify the types of disciplinary actions the company can impose on employees who are found to be in violation of the company's code of conduct.
4. Identify how the violation might be recorded and who would be notified about the violation.