(a) Who will suffer negative effects if you do not comply with Gena Schmitt’s instructions? Who will suffer if you do comply?
The negative effects of not complying with Gena Schmitt’s instructions can be detrimental to all stakeholders of the business. Those include the business, the employees, customers, and the assistant controller since he or she is disobeying a direct order.
If the controller does comply with the instructions the controller can be held ethically responsible for knowingly falsifying accounting documents. The controller can not rely on statements from the customers such as “it’s in the mail” to accurately report it as a cash and can not report it as a compensating balance to the insurance company. What are the ethical considerations in this case?
Ethical considerations include the possibility of a tarnished reputation for both the organization and the controller. Other stakeholders would also be affected if the insurance company decided to shut down funding to the business due to an insufficient balance report, which would cause hardship for all involved. What alternatives do you have?
All possible alternatives must be identified and the impact of each should be weighed. One alternative is to be up-front with the insurance company, explain the situation, and try to reach a temporary solution, maybe for a small penalty. Another alternative is to contact the customer and ask them to complete a same day wire transfer on Jun 30 instead of the check and give them some type of incentive for their continued business in the future. Final alternative is to comply with Gena’s request and await the consequences. References
Financial Accounting (6th ed.) P. Kimmel, J. Weygandt, and D. KiesoWiley, 2008 Hoboken, NJ
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