FINANCIAL ACCOUNTING (Williams et al.)
Suggested Answers for “Your Turn” cases

Chapter 1
You as a Creditor
As a creditor, you are interested in the borrower’s ability to repay the $10,000 that she borrows, plus an additional amount for the use of your bank’s money for the time the loan is outstanding. Information that would assist you in making a decision regarding the creditworthiness of the potential borrower would include employment and income information, other expenses that she must pay (for example, rent or house payment), and her history of borrowing and repaying loans. In other words, you are interested in the borrower’s “cash flow prospects,” or her ability to repay the amount of the loan, plus a fee for the use of the bank’s money (called interest) in accordance with the agreement reached at the time the loan is made.

You as a Professional Accountant
This situation puts you in a very difficult position. On the one hand, you want to do the right thing and, in your opinion, that involves an in-depth study of the problem you have found. On the other hand, you are pulled in the direction of doing what your superior says to do because you must respect her position as your superior. You may want to discuss with your superior the potential implications of the irregularities that you have found and try to convince her that some additional effort to better understand what is going on may be very important. You may want to discuss this with a peer or another person not directly involved in your engagement but whose opinion you value. You may want to talk with a person higher up in the organization than your superior, although you should be careful to avoid creating a conflict with your superior. You probably should keep a record of the steps you have taken to resolve the situation and certainly keep your eyes open for a pattern of similar behavior that