Ethics and Financial Reporting
Student’s Name:
Professor’s Name:
Course Title:
Date:
Ethics and Financial Reporting
- Consider what you have learned relative to ethics and financial reporting. What is the rationale for the calculations/process used to estimate the $180,000 uncollectible allowance?
The rationale used is “the bottom line is low.” The pressure in the company’s bottom line has forced the manager to instruct me to be involved in a fraudulent act when adjusting the balance report. From “the aging of the account receivables,” I understand that the longer a company takes to collect a payment, the less likely it is to receive it (Yuliasari, Suandi, & Sudiadnyani, 2019). The percentage of bad debt goes up. If the maturity date is adjusted, the company has a higher possibility of collecting the money owed. It is essential to close all accounts receivables to balance the permanent accounts.
- How do you think the misstatement of funds will impact the income statement and balance sheet?
The misstatement of funds can make the company lower the account due to the use of the uncollectible balance allowance. The lowering of the account due will make the company be in a financial position that is better, which would lead to an inaccurate representation of the annual financial status of the company. By doing this, the control of the internal accounts will be violated since it is put in place to ensure that the financial manager has a lower risk of false financial reporting, ensure proper operations are followed, and stay in compliance. The alteration of funds will make the income statement and the balance sheet to show budget variance in the report and show contradictions in the books that make no sense.
- What is the ethical dilemma you face? What are the ethical considerations? Consider your options and responsibilities as an assistant controller.
The ethical dilemma I am facing is whether to engage in this fraudulent act or to blow the whistle because manipulating numbers will lead to an inaccurate financial status of the company. As an assistant controller, I have an obligation to report the financial situation of the company accurately. I am also expected to adhere to The General Accepted Accounting Principles (GAAP) by not altering the figures that will make go against the principle of consistency (Shroff, 2017).
- Identify the key internal and external stakeholders. What are the negative impacts that can happen if you do not follow the instructions of your supervisor?
The key internal stakeholders of the company are the owners, and the external stakeholders are the suppliers. If I fail to follow my supervisor’s instructions, the owners of the company will be in a position to assess the return, risk on their investment, and take investment decisions based on their analysis. The suppliers will also be able to assess the creditworthiness of the company and determine whether they should supply goods on credit or not.
- What are the potential consequences if you do comply with your supervisor’s instructions? Who will be negatively impacted?
If I comply with my supervisor’s instructions, we can be open to criminal liability that may bring our careers to a sudden stop. It can also spoil the reputation of the business rendering its financial statements useless hence affecting the investor’s return from the business.
References
Shroff, N. (2017). Corporate investment and changes in GAAP. Review of Accounting Studies, 22(1), 1-63.
Yuliasari, N. L. R., Suandi, I. K., & Sudiadnyani, I. G. A. O. (2019). Analysis of Receivables Management to Minimize Bad Debts at Go Vacation Indonesia. Journal of Applied Sciences in Accounting, Finance, and Tax, 2(2), 137-141.