ACCT - ATC 3-5 - information fairly and objectively” and...

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Alex Fish ATC 3-5 2/23/2009 a. Using a longer estimated useful life spreads the total depreciation over more time, which makes earnings higher for the first few years, as compared to using a shorter estimated useful life. b. Using a longer estimated useful life would decrease costs associate with machinery, a fixed cost. It would affect fixed costs more, specifically decreasing them. c. Longer estimated useful lives lead to decreased fixed costs, which lead to better looking statistics, and increased net incomes, which look better for stockholders and investors, and can lead to a bonus or raise for a person running a business d. Such an action would violate numerous statements of ethical professional practice. “Mitigate actual conflicts of interest and avoid apparent conflicts of interest. Advise all parties of any potential conflicts”, “Abstain from engaging in or supporting any activity that might discredit the profession”, “Communicate
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Unformatted text preview: information fairly and objectively”, and “Disclose all relevant information that could reasonably be expected to influence an intended user’s understanding of the reports, analyses, or recommendations” are all doctrines that are partially or entirely violated by the action of intentionally overestimating the useful lives of depreciable assets. e. The Sarbanes-Oxley Act has many provisions that intent to prevent deliberately overestimating the useful lives of depreciable assets. The act implemented a statute that says reports cannot contain any untrue statements or material omissions or be considered misleading. It also put in place punishments for the officers that sign off on the reports; if the owner of a business allows the overestimation of useful lives for depreciable assets, they are responsible for the misleading statements they sign off on. Hillman ACCT-042...
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