Consider what you have learned relative to ethics and financial reporting. What is the rationale for the calculations/process used to estimate the $180,000 uncollectible allowance?
An aging receivable is an account that shows customers' invoices that have not been paid. However, these invoices are overdue, and thus payments are supposed to be made accordingly. On the other particular side of the balance sheet, there is a doubtful account net against the invoice accounts. These are amounts that are to be paid by the firm. However, if the amount was $20,000 but changed to adjusting the aging receivable account by 120 days, this will change the allowance required for collectibles. Notably, this kind of adjustment will make a firm appear to have made significant profits when, in the real sense, it has not (Idowu, 2018). In the long-run, inappropriate decisions will be made based on the wrong perception of the firm.
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How do you think the misstatement of funds will impact the income statement and balance sheet?
If the existing balance is $20,000, and the change is made as requested by the supervisor, this will have an effect on the current allowance for uncollectibles. In this case, it will drop from $180,000 to $135,000. The change will send a wrong message to any concerned party since they will think that the firm has made a significant profit. Commodities to be collected by customers wrongly appear as the firm's assets in the accounting records (Idowu, 2018). In this case, the income statement will be misleading and, thus, fail to serve its intended purpose. Such statements are supposed to give information about the performance of a firm for ideal decisions to be made on how to enhance progress, high performance, and productivity.
What is the ethical dilemma you face? What are the ethical considerations? Consider your options and responsibilities as an assistant controller.
If I follow the directives of the controller; I will be committing fraud since I am making impulsive mistakes. As a controller, this is totally against our roles and responsibilities. Besides, I am supposed to keenly listen and follow the instruction of those people I report to or work with while at the workplace. This entails respect, which, as an accountant, is supposed to possess the value. This presents a tough situation since I am not supposed to ignore or refuse to do what I am told by the controller. Either way, I stand to go against what I am supposed to do as an accountant; thus, the dilemma.
Identify the key internal and external stakeholders. What are the negative impacts that can happen if you do not follow the instructions of your supervisor?
In this particular case, the supervisor, the VP of finance, and I are internal stakeholders in this specific firm. These are entities that are directly involved with the operation of the firm. In other words, these are the people that directly impact productivity in a firm (Idowu, 2018). For instance, the VP of finance will allocate funds to facilitate the various processes of production in a firm. On the other hand, external stakeholders in this particular case are the consumers since they are not directly involved with the running of the firm. Following the fraud, both internal and external stakeholders will be affected. For instance, the consumer will take longer to get what they claim from the firm. Similarly, a loss arising from this impulsive mistake is likely to undermine the benefits and overall income those stakeholders are supposed to get from the firm in the long-run.
What are the potential consequences if you do comply with your supervisor’s instructions? Who will be negatively impacted?
If I comply with the controller, the company will suffer a loss in the long-run. This adversely impacts its overall income. Besides, this will hurt my integrity (Idowu, 2018). The supervisor will not perceive me as honest in future. Markedly, this will negatively affect our future relationships. For instance, if the supervisor happens to be a manager or firm owner, he may not trust me since he has known I can be persuaded to make impulsive mistakes.
Reference
Idowu, A. (2018). Accounting Ethics and Professionalism on Fraud Management: Nigerian Experience. Sumerianz Journal of Economics and Finance , 1 (2), 49-59.
