I have a question about Case. Here is Case. Ted graduated from University about

Question

I have a question about Case.
Here is Case.

Ted graduated from University about six years ago. After a few years working for accounting firm, Ted currently works as an accounting manager for WorldCrum Inc, a puplic company
and manufacture of various breands and cookies. Ted is asked by the corporate controller and his supervisor, Buford, to develop journal entries to capitalized and depreciate the cost of
internally developed software associated with a new accounting system developed by the company. After preparing and proposing journal entries, Ted has a meeting with Buford and Sam, Smith, the CFO. Sam comments that due to a recent merger, the company lost focus on the software developement project. However, Sam is very concnerned about the journal entries that Ted is porposing. Sam is concerned that Ted had under-capitalized the cost of the project, and he feels that there is no way that items expensed should be so high. Buford proposes alternative ajusting journal entries for Ted to book to address the capitalization and depreciation of the cost of internally developed sofware that increase the cost of internally developed assets and reduce overall expense.

Questions:
Identify the section in the AICPA Codification that address Ted's ethical issues. I know what AICPA, but I don't know what to look for.
What are the threat that Ted must address? I have hard time understanding this problem. I know Ted did something that he shouldn't do( under-capitalized)
What action should Ted take in this situaion to assure that the threats are at an accetable level? I don't understand this meaning of question.

Please help me. Thank you.

Explanation / Answer

1. AICPA Codification means AICPA Code of Professional Misconduct that outline a CPA's ethical and professional responsibilities. Since, Ted is a simple university graduate, therefore AICPA codification is not applicable to him.

2. Ted may have to face the queries raised by the Auditors to justify his accounting calculations and concepts, which should be in conformity with the Generally Accepted Accounting Principles (GAAP).

3. Ted should analyze the entries passed by him once more and think on the genuineness and correctness of concern by Sam. If Sam's concern is true, then Ted should analyze the adjusting entries proposed by Buford to rectify the capitalization and expenses. In any case, Ted should adhere to the principles laid down by GAAP and should do whatever is required to bring transparency in financial statements.

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