The Ethical Dilemma in the TransWays' Case Can Best Be

question 7

Multiple Choice

The ethical dilemma in the TransWays' case can best be described as:

• A) The external auditors are being blocked by the client in attempting to verify accounting treatment of oil drilling services
• B) The Director of International Accounting questions the revenue recognition for oil drilling overseas
• C) Gross negligence on behalf of the auditors to account for oil inventory
• D) Whether payments made to customs officials are can be properly recorded as facilitating payments

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Definitions:

EBIT

A gauge of company profits, Earnings Before Interest and Taxes, leaves out the charges for interest and taxes to show raw earnings.

Sales

The transactions involved in selling goods or services in the normal course of business, generating revenue for the company.

DOL

Degree of Operating Leverage; a measure of a company's fixed costs as a percentage of its total costs, indicating how earnings before interest and taxes (EBIT) change in response to a change in sales volume.

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.