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Sarah Adams is the manager of the divisional office for an insurance company that has a September 30 fiscal year-end. As a divisional manager, her
Sarah Adams is the manager of the divisional office for an insurance company that has a September 30 fiscal year-end. As a divisional manager, her compensation package includes a base salary, commissions, and a bonus when the division sells new policies in excess of its goal for the year. Sarah has been under enormous pressure lately, stemming largely from two factors. First, she is experiencing a mounting personal debt due to a family member's illness. Second, the division's sales of new insurance policies have dipped below the normal quota for the first time in years. You have been working with Sarah for five years, and like everyone else in the office, you consider yourself lucky to work for such a supportive supervisor. You also feel great sympathy for her personal problems over the last few months and admire how he has coped with all the issues in her life. In your position as accountant for the divisional 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 on the fiscal year-end financial statements, Sarah stops by your office. Sarah asks you to change the manner in which you have accounted for a new property insurance policy for a large business. A check for the premium, substantial in amount, came in the mail on September 28th. The premium covers a period beginning on October 1. You deposited the check and correctly debited cash and credited an unearned revenue - insurance premium account. Sarah says, Hey, we have the money this fiscal year, so why not count the revenue this fiscal year. We have already received the money and it's in the bank? I never did understand why you accountants are so picky about these things anyway. I'd like you to correct the way you've recorded the transaction. I want you to credit the Insurance premium 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 she leaves your office. 1. Explanation of the specific ethical issues in the case, i.e., what are the ethical questions involved, what is the ethical dilemma? 2. Identify possible violations of the Conceptual Framework and Accounting Principles 3. Identification of all parties/stakeholders (individuals or organizations) affected and outcome of the ethical decision and why/how they are affected. 4. Statement of the alternatives available to the person(s) who must resolve the ethical dilemma and clear justification of the decision/path deemed the best (i.e., what you decide to do and why). Sarah Adams is the manager of the divisional office for an insurance company that has a September 30 fiscal year-end. As a divisional manager, her compensation package includes a base salary, commissions, and a bonus when the division sells new policies in excess of its goal for the year. Sarah has been under enormous pressure lately, stemming largely from two factors. First, she is experiencing a mounting personal debt due to a family member's illness. Second, the division's sales of new insurance policies have dipped below the normal quota for the first time in years. You have been working with Sarah for five years, and like everyone else in the office, you consider yourself lucky to work for such a supportive supervisor. You also feel great sympathy for her personal problems over the last few months and admire how he has coped with all the issues in her life. In your position as accountant for the divisional 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 on the fiscal year-end financial statements, Sarah stops by your office. Sarah asks you to change the manner in which you have accounted for a new property insurance policy for a large business. A check for the premium, substantial in amount, came in the mail on September 28th. The premium covers a period beginning on October 1. You deposited the check and correctly debited cash and credited an unearned revenue - insurance premium account. Sarah says, Hey, we have the money this fiscal year, so why not count the revenue this fiscal year. We have already received the money and it's in the bank? I never did understand why you accountants are so picky about these things anyway. I'd like you to correct the way you've recorded the transaction. I want you to credit the Insurance premium 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 she leaves your office. 1. Explanation of the specific ethical issues in the case, i.e., what are the ethical questions involved, what is the ethical dilemma? 2. Identify possible violations of the Conceptual Framework and Accounting Principles 3. Identification of all parties/stakeholders (individuals or organizations) affected and outcome of the ethical decision and why/how they are affected. 4. Statement of the alternatives available to the person(s) who must resolve the ethical dilemma and clear justification of the decision/path deemed the best (i.e., what you decide to do and why)
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