Ethics in Accounting

What is the accounting problem that the Linbarger Company faces?

Linbarger Company is between a hard place and a rock and if nothing is done, the company might suffer irreversible consequences. To me, the problem manifesting itself in this scenario is a policy problem. The company seems to be lacking in terms of policies which might enhance financial prudence. Lack of strict and elaborate financial policies in the company has opened a huge loophole that can be turn to be fatal for the company at an instant. Armstrong et al. (2003), observes that in the event that there is accounting abuses, more evidence about reviewing the ethics and accounting policies is not needed; it is sufficient. The current agreement between the company and the creditor has proved to be a toll order that can easily sink a company. Companies that are a going concern should not place themselves at the mercy of outsiders no matter the relationship.

What are the ethical considerations in this case? Provide rationale for why these are ethical considerations.

Cooking of books and misrepresenting the financial status of the company are the major ethical issues in this case. The financial vice president seems to be setting the tempo for unethical behavior in the finance department. Every accountant knows that revenues are only reported when received and doing the same just because there is a promise is way out of question. What if the customer fails to deliver the check, what if the check arrives and bounces upon depositing with the bank? Who will bear responsibility? What if the creditors notes report the matter to authorities? All these questions are critical before bending the rules to conform with the boss’ demands.

Is defying the boss part of ethical issues as an accountant? Of course, yes. Failure to comply with the Vice President of my company might have undesirable consequences on my relationship with her as well as the continuity of my job.  At this point, it does not look like she is requesting, it is a command. At the same time, the company is at stake if the truth goes out and reaches the creditors. From the vice president, who I assume should be conversant with the rules, it is very unethical of her to issue such commands. I believe there are alternatives. To me, it appears like the vice president is trying to tether a scape goat just next to her incase the worst happens, I might be the scape goat incase the stakeholders come calling, it is very easy for them to believe her than me, a mere assistant controller.

What are the negative impacts that can happen if you do not follow Lisa Infante’s instructions to wait one more day to post the balance?

Waiting for one more day might lead to the unfortunate instance where the creditors will know that we as a company have not been keeping our end of the bargain. An imminent closure might be the ending that none of those involved would want to imagine. In person, Lisa and I would not see eye to eye if the unfortunate happens since the it will be easier to place the blame on me rather than walk through the scenario objectively.

Who will be negatively impacted if you do comply? Provide a rationale for why these individuals will be impacted.

Failure to comply with Lisa’s instructions will lead to unimaginable consequences to many people associated with the company. First, employees, Lisa and I included will be in trouble. Their jobs will go up in smoke, to some like me and Lisa, it will be worse as our careers will be tainted for failure to comply with simple loan agreements. The shareholders will be the worst affected. Their many years of hard work, resilience, financial discipline and huge expectations will be go up in smoke. The government will lose taxes as well as suppliers lacking a market for their products. The general public will lose out on the corporate social responsibility that this company offers as well as on our products in the market.  

What is one alternative that you could pursue in this scenario?

            Loan agreements are not always cast on stone, neither are credit officers’ incapable of having humane reasoning. As a matter of urgency, I would try to convince the credit officers of my predicament and give them a promise to have the situation under control in the shortest time possible. In the long-run, I would attempt to convince the creditors to reduce the cash limit to a level that we can comfortably manage without resorting to mundane techniques like those that have been proposed by Lisa. Internally, I will pursue the development and adoption of policies that will tighten the accounting function and the tendency of its interference by executives who are in pursuit of their own ends. For instance, I can propose that instructions with potential effect on the books of account to be delivered using written communication, not verbal.

Reference

Armstrong, M. B., Ketz, J. E., & Owsen, D. (2003). Ethics education in accounting: Moving toward ethical motivation and ethical behavior. Journal of Accounting education, 21(1), 1-16.