Case 3 Aaron Duley, the CEO of Nickel Corporation was discussing with his CFO, Michael Cucciare, on whether the company should adopt IASs for financial reporting purposes. Nickel Corporation is based in a country that permits the use of IASs or domestic GAAP. “Michael, reporting under our domestic GAAP is much more costly to the company than reporting under IASs. I understand that fewer disclosures are required under IASs. Moreover, IASs provide more choices when it comes to applying accounting method to our financial statements to produce the most favorable results. And, to be honest with you, the company is going to have to report its first operating loss in over 15 years if we continue to report under our current domestic GAAP. I certainly don’t want that to happen while I’m CEO. ” “ I hear you Aaron, but converting to IASs might look bad to investors. What if the public finds out that we were trying to hide the operating loss or switched to IASs to manipulate the bottom line? That could prove even more costly in the long run while saving the company pennies now.” Questions: 1. Background introduction. 2. Should the company prepare this year’s financial statements in accordance to its domestic GAAP or IASs? 3. In your opinion, is there anything ethically wrong with the CEO’s rationale for the adoption of IASs? Explain. 4. As the company’s auditor, would you agree to the switch to IASs? 5.
