Ethics Case

Ethics Case 8-7

        As the assistant controller in charge of general ledger accounting at Linbarger Bottling Company, I have to make tough, ethical decisions. There are usually consequences that must be faced. In this situation, if I did not comply with Lisa Infante’s instructions, the Linbarger Bottling Company will suffer the most because the company will not receive the loan from the insurance company that they need. Without the loan, the company may not be able to satisfy cash operating needs. Accounts payable will be affected and can not be paid off. The company will fail to pay vendors and interest. Short-term or long-term debt will be difficult to pay off. As a result, Linbarger Bottling Company will suffer negative effects which may cause them to run out of business. However, if I do comply to Lisa Infante’s instructions, the insurance company could suffer from a material misstatement of the company’s financial position. Although Oconto Distributors’ check will come in tomorrow, it could cause a slippery slope where the company starts recording payments earlier than when they receive the money. Also the insurance company will perceive that our company is in a strong financial position and is not in the risk of default. This, however, could be misleading.

        The ethical considerations in this case involves the trusting relationship between the company and its lenders. In a lending relationship, it is important that the insurance company is able to trust that the debtee will be able to pay off their loans. It is vital for the company to maintain integrity to keep the trust. In this case, misleading the insurance company and falsely recording the check in the cash balance is dishonest. The insurance company can eventually find out the false cash balance. As a result, the relationship can ruined. A company that is caught with fraud can lose their reputation and lenders.