Business Ethics and Morals at Mercy Company Part 2 (Ethics) You are the assistant controller in charge of the general ledger at Mercy Company.
Your company has a large loan from an insurance company. The loan agreement requires that the company’s cash account balance is maintained at $200,000 or more, as reported monthly.
Business Ethics and Morals at Mercy Company
At June 30, the cash balance is $80,000 which you report to Zoe Chu, the financial vice president. Zoe excitedly instructs you to keep the cash receipts book open for one additional day for purposes of the June 30 report to the insurance company. Zoe says, ‘If we don’t get that cash balance over $200,000, we’ll default on our loan agreement. They could close us down, put us all out of our jobs!” Zoe continues “I talked to Buddy Distributors ( one of Mercy’s largest customers) this morning. They said they sent us a check for $150,000 yesterday. We should receive it tomorrow. If we include just that one check in our cash balance, we’ll be in the clear. It’s in the mail!”
Business Ethics and Morals at Mercy Company Required
Using the American Accounting Association’s format for ethical problems as a guide (see attached handout) answer the following questions:
- Who will suffer negative effects if you do not comply with Zoe Chu’s instructions? Who will suffer if you do comply?
- What are the ethical considerations in the case?
- What alternatives do you have?
Write your answer to the question above and attach it to your printout from WileyPlus. The two responses should be emailed to me at profchu@aol.com
“Ethics and morals are synonymous. While ethics is derived from Greek, morals is derived from Latin. They are interchangeable terms referring to ideals of character and conduct. These ideals, in the form of codes of conduct, furnish criteria for distinguishing between right and wrong. ” Ethics has been a subject of investigation for hundreds of years. Individuals in financial positions must be able to recognize ethical issues and resolve them in an appropriate manner.
Source: Mary E. Guy, Ethical Decision Making in Everyday Work Situations (New York: Quorum Books, 1990), p. 5
Business Ethics and Morals at Mercy Company
Ethics affect all individuals—from the financial clerk to the high-level financial executive. Individuals make daily decisions based on their individual values. Some companies and professional organizations have formulated a code of ethics as a statement of aspirations and a standard of integrity beyond that required by law (which can be viewed as the minimum standard of ethics).
Ten essential values can be considered central to relations between people.
I . Caring
- Honesty
- Accountability
- Promise-keeping
- Pursuit of excellence
- Loyalty
- Fairness
- Integrity
- Respect for others
- Responsible citizenship
Business Ethics and Morals at Mercy Company
Ethics can be a particular problem with financial reports. Accepted accounting principles leave ample room for arriving at different results in the short run. Highly subjective estimates can substantially influence earnings. What provision should be made for warranty costs?
What should be the loan loss reserve? What should be the allowance for doubtful accounts?
In 1988 the American Accounting Association initiated a project on professionalism and ethics. One of the goals of this project was to provide students with a framework for evaluating their courses of action when encountering ethical dilemmas. The American Accounting Association developed a decision model for focusing on ethical issues.
- Determine the facts—what, who, where, when, how.
- Define the ethical issues (includes identifying the identifiable parties affected by the decision made or action taken).
- Identify major
- Specify the alternatives.
- Compare norms, principles, and values with alternatives to see if a clear decision can be reached.
- Assess the consequences.
- Make your decision.
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