Larry has been the chief financial officer (CFO) of Maxima Auto Service for the past 10 years. The company has reported profits each year its been in business. However, this year has been a tough one. Increased competition and the rising costs of labor have reduced the companys profits. On December 30, Larry informs Robert, the companys president and Larrys closest friend for the past 10 years, that it looks like the company will report a net loss (total expenses will be greater than total revenues) of about $50,000 this year.

The next day, December 31, while Larry is preparing the year-end reports, Robert stops by Larrys office to tell him that an additional $75,000 of revenues needs to be reported and that the company can now report a profit. When Larry asks about the source of the $75,000, Robert tells him, Earlier this month some customers paid for auto services with cash, and with this cash I bought additional assets for the company. Thats why the $75,000 never showed up in the bank statement, I just forgot to tell you about this earlier. When Larry asks for more specifics about these transactions, Robert mumbles, I cant recall where I placed the customer sales invoices or the purchase receipts for the assets, but dont worry; I know theyre here. Weve been friends for a lot of years and you can trust me. Now, lets hurry and finish those reports and Ill treat you to dinner tonight at the restaurant of your choice.

Required:

Discuss the ethical dilemma Larry faces: What is the issue? Who are the parties affected? What factors should Larry consider in making his decision?