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Ethics Case Study Wireless Video Company

Essay by   •  October 11, 2016  •  Research Paper  •  1,470 Words (6 Pages)  •  906 Views

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Ethics is defined as “the standards of conduct that are used to judge a person’s actions as right or wrong, honest or dishonest and fair or unfair” (Weygandt, 3, 2009). When examining ethics from a financial perspective, one can see that businesses make both ethical and unethical during situations like employee recruitment, operating against competitors, creating financial reports and more. This case analysis will examine the ethical case, Wireless Video Company and apply the five step ethics case analysis.

Step #1: Identify Ethical Issue

The issue that is being presented in this case is how it would be unethical for the president of the Wireless Video Company, Mario Wii to inform me, the controller to misrepresent the financial statements of the company through the use of adjusting entries. This misrepresentation would cause the revenues to be understated or expenses to be overstated or both on this year’s financial statements, which would not be an accurate representation of the company’s financial position.

Step #2: Identify Stakeholders

The primary stakeholders that are associated with this case are the president, me; the controller, shareholders, investors, creditors and competitors. The primary stakeholders are directly associated with the company’s financial statements. Mario Wii is the president of the Wireless Video Company and therefore is accountable for the financial statements and their accuracy. I, Gurvir Kaler am the controller who informed the president of the misrepresentation of the net income on last year’s financial statements. I am also the individual who the president is informing to misstate this year’s financial statements. Shareholders own shares of the Wireless Video Company. They constantly want to see the use of their investment and assess the company through the financial statements. Investors need accurate financial statements that can help them determine whether or not they should invest into the Wireless Video Company. Financial statements would also help them decide if they should sell their current investments of the company. Creditors use information from the financial statement to measure the credit worthiness of the company. They also inform the amount of money that is coming in and out of the company. Competitors use the financial statements to see how successful they are doing compared to the Wireless Video Company and how they can improve their companies.

The secondary stakeholders that are associated with this case are customers and the community who indirectly use the company’s financial statements. Customers are interested for information about the continuance of the Wireless Video Company, especially when they have involvement with, or are dependent on the company. The community uses financial statements to provide information about trends and recent developments in the prosperity of the company and the range of its activities that can have a positive or negative impact for the community.

Step #3: Identify alternative courses of action

In my perspective as the controller there are many alternative courses of action that could be taken. The first option/alternative is to agree with the president’s request of adjusting this year’s financial statements to correct last year’s misrepresentation. Moreover, the second option/alternative that I could do is to resign my position as the controller and avoid the entire situation in all. Finally, the third option/alternative is to refuse the president’s request of adjusting this year’s financial statements for last year misstatement and report the president to a higher level of authority within the company.

Step #4: Identify the consequences/effects of each alternatives

By conducting the first option/alternative which is agreeing to the president’s request of adjusting this year’s financial statements, there would be many effects. The first would be that I would continue to be employed by the Wireless Video Company. This could also lead to the president appraising and rewarding me with extra income, for taking the initiative of adjusting this year’s financial statements. However, I could get caught if I misrepresent the financial statements. This would essentially violate the Revenue Recognition and Matching Principle under GAAP. In addition, the Wireless Video Company could get charged with fraud. Myself and others could face possible fines or jail time. If this happens, the company’s product sales for the wireless controllers may decrease. Also, I would be living the rest of my life with a guilty mindset knowing that I committed illegal actions.

Through choosing the second option/alternative which is resigning my position as the controller to avoid the entire situation in all it would lead me to face further consequences. The first consequence is that I would have difficulty locating another job which would match my skillset and expertise. Based on the economic conditions during the time, I could



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