Your favorite uncle, who owns a restaurant, has asked you to help with his bookkeeping. He desperately
Question:
Your favorite uncle, who owns a restaurant, has asked you to help with his bookkeeping. He desperately needs a bank loan and wants you to prepare the financial statements. After going over his accounting records, you do not believe a bank will give him a loan; but you notice that by leaving out an expense or two, your uncle’s business could look more promising. After all, he does have some good ideas for improving the business.
1. What are the ethical issues?
2. What are the alternatives?
3. Who are the affected parties?
4. How do the alternatives affect the parties?
5. What would you do?
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Step by Step Answer:
1 The ethical issues in this case are conflicts of interest and falsification of financial statements 2 There are three possible alternatives a leave things as they are b include the expense c leave out the expense 21 it is not ethical to falsify financial statements regardless of the benefit to uncle or to relationship 22 it is ethical to omit expenses because omitting expenses is not falsifying financial statements 23 If a loan has been obtained based on falsified financial statements it will hurt losses if you do not omit the expense and will hurt profits if you do 24 leaving out an expense would be best for the business 3 Uncle and the bank are affected parties 4 If you dont omit the expense your uncle will lose money on his loan if you do omit it the business will show a profit so he will be able to pay off his loan 5 In this situation it would clearly be unethical not to lie on an official document even for a very good reason such as helping our uncle In fact lying on a financial statement ...View the full answer
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