this is what I have to this question so far. Can you please see if there is anything I can add to this. What are the ethical issues involved? What should Sue do and what decision-making approach should she take?
The Ethical issues are not following the accounting standards and ethics of accounting. I think it should be the Virtue Ethics approach in the decision-making.
Anne Distagne was the CEO of Linkage Construction
Inc., which served as the general contractor for the
construction of the air ducts for large shopping malls
and other buildings. She prided herself on being able
to manage her company effectively and in an orderly
manner. For years there had been a steady 22–25 percent
growth in sales, profits, and earnings per share,
which she wanted to continue because it facilitated
dealing with banks to raise expansion capital.
Unfortunately for Sue Fault, the chief financial officer,
the situation has changed.
“Sue, we’ve got a problem. You know my policy of
steady growth—well, we’ve done too well this year.
Our profit is too high: it’s up to a 35 percent gain over
last year. What we’ve got to do is bring it down this
year and save a little for next year. Otherwise, it will
look like we’re off our well-managed path. I will look
like I didn’t have a handle on our activity. Who
knows, we may attract a takeover artist. Or we may
come up short on profit next year.”
“What can we do to get back on track? I’ve heard we
could declare that some of our construction jobs are not
as far along as we originally thought, so we would only
have to include a lower percentage of expected profits
on each job in our profit this year. Also, let’s take the
$124,000 in R&D costs we incurred to fabricate a more
flexible ducting system for jobs A305 and B244 out of the
job costs in inventory and expense them right away.”
“Now listen, Sue, don’t give me any static about
being a qualified accountant and subject to the rules
of your profession. You are employed by Linkage
Construction and I am your boss, so get on with it. Let
me know what the revised figures are as soon as possible.”
In addition to the ethical issues you've mentioned, there are a few more ethical considerations involved in this scenario. One is the manipulation of financial statements. Sue is being asked to artificially reduce the company's profit for the current year by understating the progress of construction jobs and expensing R&D costs prematurely. This goes against accounting standards and ethical principles, as it misrepresents the financial position and performance of the company.
Another ethical issue involves the abuse of authority and the disregard for professional responsibilities. Anne, as the CEO, is pressuring Sue to disregard her professional duty as an accountant and follow her instructions, even though they are unethical. Sue may feel conflicted between her obligations to the company and her professional integrity.
Regarding what Sue should do in this situation, she has a few options. First, she can have a conversation with Anne and express her concerns about the ethical implications of the proposed actions. She can explain why it is important to adhere to accounting standards and the potential consequences of manipulating financial statements. Sue can also propose alternative strategies that are both ethical and aligned with the company's objectives.
If Anne persists and insists on unethical actions, Sue may need to consider reporting the issue to a higher authority within the company, such as the board of directors or an ethics committee. In extreme cases, if her concerns are not addressed and she feels her professional integrity is compromised, Sue may need to consider resigning from her position.
In terms of decision-making approach, you mentioned Virtue Ethics, which focuses on developing good character traits and making decisions based on moral principles. This approach encourages individuals to act ethically based on their personal virtues and values. Sue can apply this approach by considering her own values, integrity, and the long-term consequences of her actions. She should make the decision that aligns with her virtues and promotes the overall well-being of the company and its stakeholders.
Overall, Sue should prioritize ethical conduct, adhering to accounting standards, and upholding her professional responsibilities. She should communicate her concerns, explore alternative solutions, and escalate the matter if necessary, all while considering her personal virtues and values.