Background: Particular attention has been placed on ethics in accounting in recent years. Improper accounting methods, fraud, and other misdeeds have surfaced, adversely impacting the reputation of the accounting industry. This exercise illustrates improper accounting decisions can lead to investigated cases of purposeful fraud.

Scenario 3

1. You saw your boss take money from the petty cash fund so that she can take you to lunch. Should you automatically assume that your boss will report that withdrawal properly? Why or why not?
2. The office copier needs a few minor repairs and the supply cupboard is getting low. There isnt enough money in the budget to cover the repair expense and to buy all needed supplies. You know you can take money from one area of the budget to pay for something in another area because you did it a month ago with your supervisors knowledge. Shouldnt it be okay to do it again? Why or why not?
3. Your organization uses inventory figures for tax purposes once a year. However, inventory records are poorly maintained at your organization. Until the system can be perfected, the company owner requires that a physical inventory be taken every month. You notice during this months inventory that several boxes of components were improperly inventoried. Is it really necessary to say anything since your organization will be taking another inventory in just a few weeks anyway? Why or why not? Because inventory figures are used only once a year to determination tax on inventory, why is it so critical to maintain accurate figures as long as there is enough material to cover production requirements?
4. Do the three scenarios represent cases in which ethics in accounting might be more important at some times than at others?
5. How might you personally react and what factors guide your reactions in each of the three scenarios?