Statement of Cash Flows

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Discussion Topic 1: Ethics

Read Ethics Case CT13.8 and address the following questions:

  1. Who are the stakeholders in this situation?
  2. Was there anything unethical about the president’s actions? Was there anything unethical about the controller’s actions?
  3. Are the board members or anyone else likely to discover the misclassification?

Just do response each posted # 1 to 3 down below only

Posted 1

  • In this scenario like most of the others we’ve had the stakeholders
    are those directly involved with the company. This scenario like the
    last one are those invested with the company and the employees.
  • With this scenario it was very unethical for the president to
    convince the controller to cook the numbers. Doing so was unethical by
    both parties as this is not the correct action to take. Granted
    stakeholders don’t want to see a loss at any point, it is acceptable to
    see a company not do well one year and bounce back another. The
    controller should have said that there was a way instead of telling his
    boss that it was taken care of, and that even though there was a way
    advise against it.
  • Yes. This adjustment is something an auditor could discover easily
    but for stakeholders there is the chance they overlook it or don’t
    realize what they are looking at especially if it was readjusted to show
    the numbers being positive for the company. People do quick glances at
    everything.

Posted 2

Good morning classmates,

  1. The stakeholders are everyone that the business affects. This includes
    the ten stockholders who are used to receiving their yearly dividend,
    and all of the employees. It also includes the companies that produce
    the parts that Wesley Corp. sell through wholesaling, as well as the
    customers who rely on Wesley Corp. to ship parts on a timely fashion so
    their business can operate.
  1. As we have seen during multiple scenarios involving unethical behavior,
    when cash bonuses or dividends are linked to financial performance, the
    risk of unethical behavior increases. Samuel Gunkle is concerned about
    one thing, retaining his position as president and CEO. He is fully
    aware that if the stockholders do not receive their dividends, he may be
    out of a job and he will do what is necessary to retain that job. The
    scenario fully proves that this is the only thing he worries about, as
    when the controller came back with adjusted financial statements, the
    president was not concerned why they were changed, only that they were
    changed so that their net cash flows exceeded $ 1 million dollars
    (Weygandt, Kimmel, & Kieso, 2018). The president is operating in
    the best interest of himself, not the business and the stakeholders as
    he should.
  2. If
    a proper analysis of the financial data is performed the
    misclassification may be discovered. The board members may not look
    into the statements thoroughly enough to find the misclassification,
    however the auditing accountants that will perform their yearly audit
    should. When the auditing team locates the miscalculation, they will
    report it to the president. If they feel that he will not handle the
    matter appropriately, the auditing team is then charged to take the
    matter to the next level of management, which will be the board
    members. When this is then brought to their attention, they should
    realize that the president had a hand it this issue and act accordingly.

Posted 3

Hello Instructor and Class

Who are the stakeholders in this situation?

The stakeholder will be the equity stockholders, board of directors, and employees.

Was there anything unethical about the president’s actions? Was there anything unethical about the controller’s actions?

Yes,
Samuel, the president, request for the controller to do modifications
on the accounts for the income to be higher than initially stated. That
would be why it was unethical because his actions are no longer
acceptable.

Are the board members or anyone else likely to discover the misclassification?

The auditors, internal, and external could discover the misclassification —

also board members or anyone that finds the misclassification.

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