Do you see how management could pressure

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Question: If a company gets down to year end and say the current ratio covenant is supposed to be .75. Assume: Current assets = 75,000 Current liabilities = 101,000. Included in the 101,000 of current liabilities is a bill from a vendor for 1,200 for cleaning services performed in December (in Accounts Payable). Do you see the temptation that the accountant may have to exclude that 1,200 bill from AP and then just input it in January? If that 1,200 bill is not recorded until January, the company will be in compliance with its bank covenants. If the 1,200 bill is recorded correctly, then the company will be out of compliance. Even if the accountant records the transaction correctly, do you see how management could pressure the accounting staff to record the bill differently? If the bill was recorded in January, how would anyone know? What are the chances that it would be discovered?

Reference no: EM133500840

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