Accounting: Ethics and Company Essay

Submitted By dsadrack
Words: 1592
Pages: 7

Ethical Dilemma Camp industries is involved in a lawsuit towards the company. The lawyers in this case felt as though they will not be winning the case and will lose a approximated amount of thirty million dollars. Now when the company is told that will be close to the amount due to be owed, is when the problem of when to report the amount came into play. In a case like this it is rare for a company to accrue the amount on loss contingency without knowing the true and full amount. In accrual based accounting the measuring of the entity’s and resource sacrifices during the period, regardless of when the cash is gathered or paid out (Spiceland, G-0). When the company talks about a loss contingency it is a uncertain situation that involves potential loss depending on whether some future event occurs (Spiceland, G-1). When you look at this the question is to either put the loss in without knowing the amount, or wait until the full amount on the settlement is reached? The ethical dilemma here is when to report the amount when the full settlement of the lawsuit is reached or to report the accrual loss contingency of the amount estimated. This is ethical problem because the person who is posting it and person reviewing it are faced with more then one option on what to do with the loss. No one person knows the right decision right away and that is what makes this a huge dilemma with the company. Now the stakeholders in this situation are the chief financial officer, the CEO, and the person posting the amount to the books. The CFO is the one who looks over all the decisions made by everyone under him. So if he is wrong by what he says to do then it is on him for the wrongful reporting of the amount. This could result in a audit of the companies financial books and if there is a big enough problem then everyone involved is under review. This is where the CFO, CEO, and person reporting it have an ethical dilemma because all three will have their jobs examined to see if they made the right choice. It not only affects the company and its financials but also the stakeholders and the jobs they hold as well. There is a huge list of values that go along with this case, the one that stands out to me the most would be responsibility to users of financial statements. The people who are not only reporting the statements, but also the people who look them over should know how and what to look for. They should know the rules and what should be reported when, so there is no reason to question what is being done. Just like in this case they know that the right kind of posting is going to come down to the responsibility of the reporter and higher ups. Honesty is a huge value with his kind of reporting as well, they have to be honest to the company and its statements. If they are dishonest it can lead to again job reviews and also criminal punishment in the end. So if the reporter or the CFO are dishonest about the amount or where it should be then it becomes an issue of the honesty policy. Loyalty to the company I think plays the biggest role in this one. If someone loves the company and their job then they are going to be loyal to the statements as well, and know what is right and wrong. Values play a huge role in this case because it’s all on how they like the job they have and the company and honesty to follow with it. The courses of action that I would consider besides just this one would be to look at if there is a possible case of having to report less or more. Then look at if it would really affect the financials for the year and for that period as well. I would look at the course of action of seeing if that lump sum was going to be taken at one point and would wait until the settlement was agreed upon. Then I would report it to the financial statements on the lump sum amount. But then there is a way to have that money be on a payment option for the company as well. SO if it is on the payment option then you have to show for…