You are a newly graduated accounting clerk working at Big Bad Wolf Corporation. You have student loans to pay off, so you're happy you finally have a job and can pay down your debt. You've been working at Big Bad Wolf for three months now, and you're busy with the preparation of the financial statements for 2019. You're approached by the chief financial officer, the person who interviewed and hired you. He says:

"Listen, I need a little favor. I know you're in charge of entering adjusting entries in the accounting system. Can you enter this one?"

The journal entry involves the reclassification of a long-term investment (government bonds) to short-term investments. You know that the government bonds are long-term, but when you question him, he says:

"Look, don't ask questions. I know what needs to be done."

You decide to go one step further and explain to him you know that the bonds have a maturity of five years and should not be classified as short-term. He replies to you:

"Alright. I don't know how you knew that, but you have to keep it quiet. We are breaching our debt covenant and need to boost our current ratio; otherwise the bank will call our loan, and we'll be out of business. And yes, that means that you'll lose your job. I don't want you to lose your job, so help me out, okay?"

Exercise

1. What is the ethical dilemma for the accounting clerk?
2. Discuss how you would respond to the situation.