1. What do you think was the motivation for Cubbies Cable in taking the position to expense all cable costs during the year ended September 20, 2013? Would you characterize the position as an attempt to manage earnings? Why or why not?
2. Who are the stakeholders in this situation? Identify the major ethical issues that should be of concern to Binks in deciding whether to just go along with the firm in its support of the client (based on Hondley position) or support the position of the audit manager. What would you do at this point if you were in Binks position? Why?
3. Do you think it is ethical for CPAs to horse trade when negotiating with a client about the proper GAAP to apply in a particular situation? How does such negotiating relate to the accepted auditing standards of the AICPA and PCAOB discussed in Chapter 5?