A Car Tire Manufacturer Guarantees That Its Tires Will Last

question 5

Multiple Choice

A car tire manufacturer guarantees that its tires will last for 50,000 miles and,if they do not,it will replace the tires at no cost.A CPA working for this manufacturer of car tires is in charge of determining the liability account entitled "Liability for Warranty Repairs." Historically,this warranty account has had a balance equal to 2% of sales.However,due to a drastically high level of defects at the company's offshore manufacturing facility,this liability account needs to be increased by millions of dollars to roughly equal 9% of sales. To avoid negative publicity,this CPA's employer does not want this revised amount to be disclosed in its financial statements.The employer:

• A) Can keep this fact confidential because the CPA knows, or reasonably should know, that it will cause harm to the employer
• B) Cannot keep this fact confidential because the duty of confidentiality does not apply to the relationship between an employer and an employee
• C) Cannot keep this fact confidential because the CPA has a primary duty to ensure that a company's financial statements are accurate
• D) Can keep this fact confidential because the duty of confidentiality does apply to the relationship between an employer and a CPA-employee

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Definitions:

Fixed Costs

Costs that remain constant regardless of the level of production or services provided by a company.

Health Savings Accounts (HSAs)

are tax-advantaged accounts that individuals can use to save and pay for qualified health expenses, often linked with high-deductible health plans.

Qualified Medical Expenses

Out-of-pocket costs for healthcare that are tax-deductible under certain conditions, including diagnoses, treatments, and preventative care.

Insurance Exchanges

Online marketplaces established to facilitate the purchase of health insurance in accordance with the Affordable Care Act.