Cambell Soup Company Case
Campbell Soup Company
1. Identify legitimate business practices that corporate executives can use for the primary purpose of manipulating or “managing” their company’s reported operating results. Are such practices ethical? Defend your answer.
– Legitimate business practices that corporate executives can use for the primary purpose of manipulating is slowing long term projects for which the percentage of completion of accounting method are used to recognize revenue. GAAP does not state these practices are unethical but I believe they are unethical because they false represent company’s financial information and this misleads the investors and the shareholders
2. Suppose that a company uses one or more of the practices that you identified in responding to the previous question. What implications, if any, do those practices have for the company’s independent auditors?
– If the auditors fail to accurately verify all the information and failed to recognize that the company did not follow accounting principles according to GAAP it will bring bad reputation to the independent auditors and to the firm itself.
3. What auditing standard, if any, requires auditors to determine whether their clients have properly classified key amounts in their periodic income statements? Identify three methods that audit clients can use to put a favorable “spin” on their reported operating results without changing their “bottom line” or net income.
– The following auditing standards have to be determined to properly classify key amounts in their periodic income statement. The business has to be a legitimate business practice. There has to be presentation and disclosure where everything should be clearly disclosed in the financial statements and classification and understandability where everything has to be properly described, disclosed and recorded in the proper accounts. Favorable spin method without changing