Management of Statement of Cash Flows

Read Case 15-59, “Management of Statement of Cash Flows, Ethical Issues,” on p. 834 of the text.

Post a clear and logical response in 250 words to the questions on p. 835 of the text.

1. Form a group with two to four other students. Discuss the propriety of the arrangement that Fred has with Bill Lawson concerning the disbursement of the proceeds from the loan. (type out what should be discussed)

2. In your group, discuss the propriety of the actions that Fred is proposing to improve the firm’s statement of cash flows. Suppose that there is very little risk that the loan will not be repaid. Does this information affect your assessment? (type out what should be discussed)

3. Assume that Karla is subject to the Institute of Management Accountant’s (IMA) code of ethics. Look up this code, and identify the standards of ethical conduct that will be violated, if any, by Karla should she agree to cooperate with Fred’s scheme.

4. Using the IMA code of ethics, if you were in Karla’s position, what would you do (supposing that Fred insists on implementing his plan)? Now, answer the question, assuming that Fred is willing to consider alternative ways to solve the company’s problems.

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