Ethics case You are the controller for Pro clean services,a company that provide

Question

Ethics case

You are the controller for Pro clean services,a company that provided Janitorial services to large commercial customers. The company has been very successful during its first 2 years of operations,but inorder to expand its customer base,the company is in need of additional capital to be used for equipment purchases.The 2 brothers who started the business,Adam and Tim Olson,invested their life savings in the business,so they have contacted a local bank about securing a loan for $175,000.

The bank has asked for a set of financial staements,and Adam being the businessperson that he is,knows that the bank is going to be looking for a growth in earnings each year.Although the companys earnings have increased,Adam would like the past year to look better than it is now.

Adam stops by your office late in the afternoon on Dec 31 to find out when the financial statement will be ready. You explain that you still have to close out the end of the year, but should have them ready by the end of the week.Adam tells you that he is aware of a major contract that Tim is working on that will be signed on Jan 3rd and asks you to delay the closing process for a few days so that a new contract can be included in this years operating results.You attempt to explain to Adam that you cannot do that,but you can tell that he is not listening to you.Adam interupts by saying" I do not know why you accountants get so worked up over a few days. Let me just say that it would be in you best interestto include this contract in the current years operating results" Adam leaves your office in a hurry,and you hear mutter under his breath and he turns the corner,"That accountant-who does he think he think he is trying to tell me how to run my business?"

Requiements

1) what are the accounting issue related to Adams request?

2)what is the ethical issue involved in this case?

3)what would be appropriate course of action for you to take?

Explanation / Answer

The accounting issue related to Adams request is about recording of the transactions as per the standard accounting procedures, practices, and principles. It is simply not possible to turn the clock backwards. A contract likely to be materialize in January can not be shown in the accounts ending by 31st December.

The ethical issue involved is about misrepresentation of facts and or not giving the true picture. This may be joining hands with the client to cheat the third party, a bank in this case, for procuring/ securing a loan for $175,000.

I would not like to deviate from the ethics of my profession and present the true picture as exists on the day of closure of annual accounts. However, additional statements after the closing of accounts may be prepared to show/ highlight the current developments and status for the consideration of the local bank.

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

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