Question
The New Management Accountant BETH 5120 Jeffery Smith Susie is a new associate to the lead management accountant for Company C, a small, privately held
The New Management Accountant BETH 5120 Jeffery Smith Susie is a new associate to the lead management accountant for Company C, a small, privately held company involved in primarily business-to-business sales. She graduated four years ago with a bachelor's degree from a distinguished university with an emphasis in accounting. During the current quarter company C has already exceeded it sales projections by 14 percent. Based upon recent years' experience, the Director of Operations of Company C, Charles, recently instructed her to delay recording these additional sales until the next quarter. Due to market fluctuations, Charles anticipates that sales will fall during the next quarter. He makes the following remark to Susie: Look, sales are sales. The company will benefit from the revenue no matter when it is recorded for our internal accounting purposes. You know that many of us receive compensation based on sales revenue from quarter to quarter. My success and the success of our colleagues depend upon meeting certain revenue targets. Go ahead and book the current quarter's sales in the upcoming quarter. I think this will only involve "holding on" to those figures for another three weeks. It won't impact the company's reporting for tax purposes and, as operations director, I will make sure it won't impact our ability to forecast future sales. Susie is puzzled by this request. She understands Charles' position but knows that as an accountant she should record financial information as accurately as possible; this includes timely information regarding sales and receipts from accounts receivable. These expectations are expressed in C's company policy and have been prescribed by her immediate supervisor, the lead management accountant, who also reports to Charles. Study Questions 1. From an ethical point of view, what, if anything, is wrong with Charles' request of Susie? Identify and explain your reasoning. (Note: you may think that Charles' request is wrong for more than one reason.) 2. What would you do if you were Susie? What would you tell Charles and what course of action would you take, based on the available information?
Develop two reasons why Charles' request is unethical. Be sure to clearly identify these two reasons and explain why they support the conclusion that Charles has acted unethically.
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