Ethical Writing Assignment
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To: My Mentor
From: Accounts Assistant
Subject: Ethical Dilemma
According to the loan requirement of the organization, the cash balance of our organization is below the minimum standards required by lenders. Concerning the mentioned scenario; I’m obliged to make an ethical decision regarding the suggestion of the supervisor requiring me to delay recording the December payroll journal entry until January of the following year. I presume that the scenario is a fraudulent representation consisting of some elements of the fraud triangle. The element of perceived pressure is depicted in the situation.Thunderduck Shoes Company is financially obliged to maintain a minimum cash balance of $75,000 in its year-end balance sheet. However, the cash balance in the general ledger of the organization is recorded as $80,000 before the record of payroll salaries amounting to $15,000.As well; the aspect of perceived opportunity is prevalent in the circumstance since the organization does not have reliable internal control. Ideally, this is because the supervisor agrees that the payroll records for the current month should be recorded in the next month. Rationalization is another element that is depicted in the scenario. The supervisor justifies the action by presuming that the delaying of patrol recording would help the firm to achieve the loan requirements.
I presume that the fraud in consideration is accounting fraud involving delayed recognition of expenses and it may result in both long term and short term consequences. I understand that if I act according to the supervisor’s request, I will violate the standards of accounting and professional values. Ideally, in the short term, the creditors of the firm will suffer since they will access falsified information. However, in the long run, the organization will suffer since it will face the penalties of violating the standards of the Generally Accepted Accounting Standards. Besides, as an employee, I will jeopardize my professional standards, and I may face serious consequences. According to GAAP, the failure to recognize the expenses in the current accounting period is a violation of the accounting principle(Craig, Smieliauskas and Amernic, 2014). Failure to comply with the supervisor’s request may threaten my job security and affect my relationship with the supervisor. Besides, it may affect the potentiality of the firm to access loans from a particular lender. Nonetheless, in the long term, the decision will save the firm from being sued of accounting fraud.
I believe that the most significant concern is being honest to those who rely on my work. Regarding the mentioned concern, stakeholders of the organization such as investors and lenders rely on financial and accounting information when making decisions to invest in the firm or offer financial loans (McBroom, 2019). Therefore they should gain access to true, accurate and quality accounting information. Moreover, I should not violate my professional standards of presenting accurate accounting information on the expense of my relationship with the supervisor.
I have two courses of alternatives to undertake in the given scenario. I can either comply with the supervisor’s request or decline the request. Given the current circumstances, I denote that the decline of the request is the best course of the alternative that I should undertake. The action is ethical, and it is in line with professional standard and regulations of the Generally Accepted Accounting Principles.
Craig, R., Smieliauskas, W., & Amernic, J. (2014). Assessing Conformity with Generally Accepted Accounting Principles Using Expert Accounting Witness Evidence and the Conceptual Framework. Australian Accounting Review, 24(3), 200–206. https://doi.org/10.1111/auar.12039
McBroom, M. M. (2019). Generally Accepted Accounting Principles (GAAP). Generally Accepted Accounting Principles (GAAP) — Research Starters Business, 1–5.
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