Ethics in Accounting
The company has ineffective financial reporting as they have violated the agreement that they had with the insurance company. The company is afraid that the insurance company may not find them viable as they lack the capital to operate their business without driving them into great debts. The company failed to keep a thorough record on their update with the cash balance and hence time caught up with them before they could balance their ledgers hence resulting to them considering the option of closing the books a day later than the agreed time. The vice president should not have waited until the last minute while she would have been aware of the problem from the start. Communication is quite important in the business. For instance, if the company had a good communication system, the vice president would have known of their insufficient cash balance in their ledger and hence they would have worked together in talking with the Oconto Distributors to hand in their cheque earlier so as to receive the cheque on time before the closing of the ledger.
Making a wrong decision all for the right reason can at times have a negative effect and also a serious repercussion. Being the financial vice president it is very unprofessional to request the assistant controller to keep the books open. Lack of transparency in the financial reporting may destroy the insurance company trust (Klein, 2015). Financial reports, therefore, ought to convey a high degree of accuracy and should be concise. It is thus the duty of the controllers to deliver financial reports that are honest so as to allow the lenders to analyze the financial position and performance of the company. In this case, the assistant controller was unethical since the code of ethics for controller emphasis on acting ethically in the interest of all stakeholders (Klein, 2015). However, in this case, the controller acted in favor of the vice president rather than putting her integrity first and fighting for the interest of both the company and the insurance company. Ethically, the controller would have communicated with the insurance company explaining the situation at hand and thus seeking for their permission for the delayed closing of the ledgers. This would have been ethical and it would increase trust between the company and their lenders.
The vice president is expected to carry a level of trust that the other employees would emulate and also would rely on. Hence, the assistant controller, in this case, is obliged to follow the instructions as instructed by her senior, the vice president in spite of his or her own ethical perspective. Failure to carry out this task of keeping the books open may put the assistant controller at a higher risk of losing her job. Therefore putting into consideration that her job is at stake, she will be forced to follow the instruction of the vice president regardless of the unethical aspect of doing this.
Once the controller agrees to comply with the vice president scheme of closing the book at a later date, it will put her at a risk of being used by the vice president for other unethical practices to be overlooked and this may place the controller in a real financial misconduct (Elliott & Elliott, 2007). One cannot be able to replace honesty and ethical conduct within a business and therefore one act of misconduct by the controller can affect her career in a negative way. The vice president might also be negatively affected following her conspiracy with the controller and she may be forced to take responsibility for her actions and this may also put her work in line with that of the entire company. Once the insurance company realizes that the company decided to close the ledgers after the agreed date, the insurer may feel that the company is not in a position to pay their loan and this may negatively impact their business credit score. This may, in turn, lead to the business close down thus resulting in all the employees losing their job just because the company has a bad reputation with lenders following the violation of the agreement. Thus the controller has to think through this so as to ensure that all stakeholders’ interests including those of the employees are all served by making the right decision.
It is recommended that the controller ought to have closed the ledger in accordance with the accounting procedure and on the other hand, she would have advised the vice president to explain the situation to the insurance company. The vice president ought to consider offering the insurance company a draft asking them for a concession to close the books on the next day. The vice president could also make a consideration on calling the Oconto Distributors and plead with them to make an online bank transfer rather than giving them a cheque. In doing this, the insurance company will be more inclined to trust the company’s motives as they will see the act as an honest one.
References
Klein, G. L. (2015). Ethics in accounting: A decision-making approach.
Elliott, B., & Elliott, J. (2007). Financial accounting and reporting. Pearson Education.
