Nancy Tercek, the financial vice president, and Margaret Lilly, the controller, of Romine Manufacturing Company are reviewing the financial ratios of the company for the years 2022 and 2023. Tercek notes that the profit margin on sales has increased from 6% to 12%, a hefty gain for the 2-year period. She is in the process of issuing a media release that emphasizes the efficiency of Romine Manufacturing in controlling costs. Margaret Lilly knows that the difference in ratios is due primarily to an earlier company decision to reduce the estimates of warranty and bad debt expense for 2023. Lilly, who is unsure of her supervisor’s motives, hesitates to suggest to Tercek that the company’s improvement is unrelated to efficiency in controlling costs. To complicate matters, the media release is scheduled in a few days. 

Instructions

a. What is the ethical dilemma in this situation, if any?

b. Should Lilly, the controller, remain silent? Give reasons.

c. What stakeholders might be affected by Tercek’s media release?

d. Give your opinion on the following statement and cite reasons: “Because Tercek, the vice president, is most directly responsible for the media release, Lilly has no real responsibility in this matter.”