AC 302 WEEK 8 DISCUSSION

AC 302 WEEK 8 DISCUSSION
Mike Crane is an audit senior of a large public accounting firm who has just been assigned to the Frost Corporation- annual audit engagement. Frost has been a client of Crane- firm for many years. Frost is a fast-growing business in the commercial construction industry. In reviewing the fixed asset ledger, Crane discovered a series of unusual accounting changes, in which the useful lives of assets, depreciated using the straight-line method, were substantially lowered near the midpoint of the original estimate. For example, the useful life of one dump truck was changed from 10 to 6 years during its fifth year of service. Upon further investigation, Mike was told by Kevin James, Frost- accounting manager, “I don’t really see your problem. After all, it- perfectly legal to change an accounting estimate. Besides, our CEO likes to see big earnings!”

Answer the following questions in the Discussion Board:

What are the ethical issues concerning Frost- practice of changing the useful lives of fixed assets?
Who could be harmed by Frost- unusual accounting changes?
What should Crane do in this situation?

200 words

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