Your company produces an assortment of school supplies, and has a policy of supp

Question

Your company produces an assortment of school supplies, and has a policy of supporting child health. One day you happen to notice information that (although it is not your area of expertise), in your opinion, indicates that the product produced by your company may be harmful to pre-teens. Furthermore, being the CFO, you have firsthand knowledge that the costs presented by the production department are understated by 15%. You recall that the last "trouble-maker" received a call from the Chairman of the Board, and had a hasty departure from the company.

-

What should you do? Speak to the Chairman or CEO about both items? Only report the item(s) you can verify? Talk to the respective department head(s)? Do nothing – someone else is responsible, or others will notice anyway? What should you do?

-

In Short Essay Form, answer the following questions:

-

1) What is the Board of Directors, and what is their responsibility? (6)

-

2) Should you act on information that in your opinion" 'indicates'" something may be wrong? Why, or why not? (3)

-

3) What item(s) are you required to address, and why? (4)

-

4) Who all might be affected by the above situation? (4)

-

5) What other issue(s) may be present here? (3)

Explanation / Answer

1. The board of directors is a joint group of people who look into the activities of the organisation. They are representatives of the shareholders and are responsible for the well-being of the company as well as safeguarding the interests of stakeholders of the business.

2. If there is some information which indicates that something is wrong it should be discussed and brought to notice. This is because expressing the opinion will protect the company from legal issues arising from harm caused to preteens. Since this is not complete information, it should first be delved into and discussed with production department before approaching the Board.

3. I should first bring into notice that the product produced by the company is harmful to preteens. Secondly the board of directors should be informed about the under statement of costs. This is because understating the costs will artificially inflate the profits which will then not show a true picture of the companies performance.

4. The employees who are understating the cost maybe under fire for the situation. Not correcting the situation will affect all the stakeholders and users of financial statements. Also the stakeholders of the company will be affected if the product is continued to be marketed even though it is harmful.

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.