Question
Mike Lynch is the manager of an upstate New York regional office for an insurance company. As the regional manager, his compensation package comprises a
Mike Lynch is the manager of an upstate New York regional office for an insurance company. As the regional manager, his compensation package comprises a base salary, commissions, and a bonus when the region sells new policies in excess of its quota. Mike has been under enormous pressure lately, stemming largely from two factors. First, he is experiencing a mounting personal debt due to a family member's illness. Second, compounding his worries, the region's sales of new policies have dipped below the normal quota for the first time in years.
You have been working for Mike for two years, and like everyone else in the office, you consider yourself lucky to work for such a supportive boss. You also feel great sympathy for his personal problems over the last few months. In your position as accountant for the regional office, you are only too aware of the drop in new policy sales and the impact this will have on the manager's bonus.
While you are working late at year-end, Mike stops by your office. Mike asks you to change the manner in which you have accounted for a new property insurance policy for a large local business. A substantial check for the premium came in the mail on December 31, the last day of the reporting year. The premium covers a period beginning on January 6. You deposited the check and correctly debited Cash and credited an unearned revenue account. Mike says, "Hey, we have the money this year, so why not count the revenue this year? I never did understand why you accountants are so picky about these things anyway. I'd like you to change the way you have recorded the transaction. I want you to credit a revenue account. And anyway, I've done favors for you in the past, and I am asking for such a small thing in return." With that, he leaves for the day (Libby, Libby, & Short, 2014).
For the previous scenario, you will create a written document that accomplishes the following:
1. Identify the ethical issue within the scenario.
You will identify the ethical issue presented in the scenario. Explain in detail why the ethical issue exists and rules that govern the handling of the situation. You must use at least two credible outside source that support your assertion regarding the ethical dilemma. You may use your textbook as one of your sources.
2. Answer each of the following questions:
Who will potentially be harmed?
Who will potentially benefit?
What (if any) rights or claims will be violated?
In this section of your answer, you need to address the stakeholders involved in the situation. Then, you need to provide an explanation of how those stakeholders will be affected. When you discuss who might be harmed by the situation, fully explain how they will be harmed. When you discuss who will potentially benefit, also share in detail how they will benefit. When you discuss the violation of rights and/or claims, give details about those rights and/or claims and why the ethical issue will impact those rights and/or claims.
3. Discuss your responsibility and obligations as an accounting professional.
In the concluding paragraph, discuss how the matter should be handled based on your responsibilities and obligations, as well as your ethical convictions. Describe in detail why you would choose to deal with the ethical issue in this manner, from the standpoint of responsibility as an accounting professional and from an ethical standpoint.
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