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? This is what I have to this question so far.
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.”
Based on the given information, we can identify several ethical issues involved in this scenario.
1. Not following accounting standards and ethics: Sue is being asked by the CEO to manipulate the company's financial statements by misrepresenting the progress of construction jobs and improperly expensing R&D costs. This action goes against the professional ethics and standards of the accounting profession.
To address these ethical issues, Sue should consider the following:
1. Analyze the situation: Sue should assess the potential consequences of the CEO's request. Manipulating financial statements can lead to legal issues, damage the company's reputation, and harm stakeholders, such as investors and employees. It is crucial to understand the gravity of the situation and the moral implications of complying with the request.
2. Follow accounting standards: Sue should adhere to the professional standards of the accounting profession, even if her boss instructs otherwise. This includes accurately reporting financial information, following recognized accounting principles, and maintaining the integrity of financial statements.
3. Seek guidance and support: Sue should reach out to her professional network or consult with other professionals, such as senior accountants or ethical advisors, to gather opinions and insights about the situation. They can provide guidance on how to navigate this ethical dilemma and propose alternative solutions.
4. Communicate concerns: Sue should express her concerns to the CEO, emphasizing the potential legal and ethical consequences of the requested actions. It is important to communicate openly and assertively about these concerns while maintaining professionalism and respect.
In terms of the decision-making approach, the Virtue Ethics approach seems appropriate. Virtue Ethics focuses on personal character traits and moral virtues to guide decision-making. Sue should consider the virtues of honesty, integrity, and responsibility in making her decision. She should prioritize doing what is morally right and in line with her professional obligations rather than succumbing to the pressures of her boss.
Overall, Sue needs to make an ethical decision based on her professional responsibilities and moral values, even if it means opposing her boss's request. Seeking guidance and following accounting standards will help her navigate this dilemma effectively.