Accounting Effective Financial Reporting Strayer

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Accounting Effective Financial Reporting Strayer

Assignment: Ethics in Accounting

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. (1-2 paragraphs per question)
  • Reference back to your text book 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 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 a 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.