Effective
financial reporting depends on sound ethical behavior. Financial scandals in
accounting and the businesses world have resulted in legislation to ensure
adequate disclosures and honesty and integrity in financial reporting. A sound economy is contingent on truthful and
reliable financial reporting.
Instructions:
·
Read
the following scenario.
·
Answer
the questions that follow. Your answers should result in a 2-3 page submission.
·
Refer
back to your textbook for guidance on how to think through the scenario.
Scenario:
Imagine
you are the assistant controller in charge of general ledger accounting at
Linbarger Company. Your company has a large loan from an insurance company. The
loan agreement requires that the company’s cash account balance be maintained
at $200,000 or more, as reported monthly.
At
June 30, the cash balance is $80,000. You give this update to Lisa Infante, the
financial vice president. Lisa is nervous and instructs you to keep the cash
receipts book open for one additional day for purposes of the June 30 report to
the insurance company. Lisa says, “If we don’t get that cash balance over
$200,000, we’ll default on our loan agreement. They could close us down, put us
all out of our jobs!” Lisa continues, “I talked to Oconto Distributors (one of
Linbarger’s largest customers) this morning. They said they sent us a check for
$150,000 yesterday. We should receive it tomorrow. If we include just that one
check in our cash balance, we’ll be in the clear. It’s in the mail!”
Questions
1. What
is the accounting problem that the Linbarger Bottling Company faces?
2. What
are the ethical considerations in this case? Provide rationale for why these
are ethical considerations.
3. What
are the negative impacts that can happen if you do not follow Lisa Infante’s
instructions to wait one more day to post the balance?
4. Who
will be negatively impacted if you do comply? Provide rationale for why these
individuals will be impacted.
5. What
is one alternative that you could pursue in this scenario? Support your
recommendations with information you learned in this class.
Grading
for this assignment will be based on answer quality, logic / organization of
the paper, and language and writing skills, using the following rubric.
