Your client is preparing financial statements to show the bank. You know that he has incurred a computer repa

Question

Your client is preparing financial statements to show the bank. You know that he has incurred a computer repair expense during the month, but you see no such expense on the books. When you question the client, he tells you that he has not received the official bill, although he knows the expense was $1,250. Your client is on the accrual basis of accounting. He does not want the computer repair expense on the books as of the end of the month because he wants his profits to look good for the bank. Is your client behaving ethically by suggesting that the computer repair expense not be booked until the official bill is presented? Are you behaving ethically if you go along with the client's request? What principle is involved here?

Answer 1

Per your description it sounds like it should properly be recorded as an expense and accrued as an accounts payable amount.

In the auditing world you would have to consider two things. First, is the client hiding other things. If the amount is material then you should be worried that the client is hiding this and the bank is going to rely on it.

Answer 2

There is no a very good chance that this expense will be repeated again soon. The bank is interested in knowing that on an average the return for the business is fairly presented. If all expenses are presented except this one at this time reference, all is well and the bank is happy.

Can you live with yourself, it is evident that the client can live with himself. You are the only one that have a bug to this problem.
I say get over it, it will all come out in the wash in short order.

Answer 3

Technically if he has not received the billing statement it is not on the books. At 1,250.00 is this amount going to impact the outcome that much? Sounds nit-picky to me.