The proposed paper revolves around the major principles of accounting, central procedures, and ethics. The case of Russel Company is selected as the background for the discussion. The decrease in sales the firm experiences might influence its stock prices and make a company a takeover target. Under these conditions, the president wants to employ specific techniques to hide this information and defer expenses. The paper investigates the legal aspects of this strategy, its ethics, major stakeholders, and whether such actions can be allowed regarding the existing accounting rules. In general, the analysis shows that such actions contradict the major principles of accounting, can deteriorate the image of a company and its managers and can be viewed as unethical. For this reason, Russel Company’s case demonstrates the necessity of observing the existing code and acting regarding the established principles.
The described situation implies several stakeholders who might be influenced by outcomes. First, the decision to manipulate the profitability of the firm is made to influence stock prices, which is critical for shareholders and other players. It means that they are directly affected by the strategy selected by the president. Second, Zoe Baas, a controller who is asked to defer expenses, is another important stakeholder. Her actions and decisions influence the whole situation and others. Furthermore, Russell Company’s president can also be viewed as a stakeholder. His decision to use this method and pressure caused by him on Zoe Baas leads to the provision of irrelevant and inaccurate data. Finally, the authorities responsible for the monitoring of such firms’ work can also be considered stakeholders as they might provide specific punishment or regulations as a response to the described manipulations.
The ethical considerations of the president’s request
Because the described decline is viewed as a one-year aberration caused by the shift to new products and the expectations linked to the sales growth, the president wants to adjust entries to avoid alterations in stock prices. This factor is a significant indicator of the company’s health, meaning that its alteration might lead to its takeover. For this reason, the president’s major motive is to save the company by providing irrelevant information, which will help to avoid changes in prices. However, following the basic principles of accounting, the given practice is unethical (Weygandt et al., 2021). It is critical to provide accurate and real information about revenues and expenses to avoid fraud or new manipulations (Weygandt et al., 2021). Under these conditions, the president’s request should be viewed as unethical and leading to the critical deterioration of the company’s management image. Moreover, it can affect Zoe Baas, who is responsible for accounting.
The ethical considerations of Zoe dating the adjusting entries December 31
There are also several ethical considerations about Zoe dating the adjusting entries. First of all, it can be viewed as an inappropriate action because of the major goal of this decision. It is an intentional attempt to hide information and make other parties believe in a stable company’s revenues. It contradicts the basic accounting principles and should be viewed as an inappropriate strategy (Weygandt et al., 2021). Second, manipulating data about revenue and expenses and providing irrelevant financial data, Zoe helps the president to avoid alterations in the stock price, which can also be viewed as an unethical strategy. It might influence other stakeholders and precondition alteration in their positions. For this reason, such actions cannot be allowed.
Can Zoe accrue revenues, defer expenses, and still be ethical?
Zoe can accrue revenues, defer expenses, and remain ethical under no circumstances. The strategy selected by the president and the controller pursues the goal of hiding importing information to create a false image of a firm. It might affect numerous stakeholders and their decision-making, which might also lead to financial losses. For this reason, it contradicts the existing code of ethics (Weygandt et al., 2021). The only option was to inform the president about the impossibility of this strategy and its illegal nature. Moreover, Zoe should have refused to manipulate data as it can be viewed as a crime and affect her career. Under these conditions, the only way to remain ethical is to warn the president and inform him about the necessity to provide only relevant and accurate information.
Can Zoe’s accrued revenues and deferred expenses be illegal?
The strategy selected by the president and Zoe to avoid changes in the company’s stock prices can be viewed as illegal. First of all, the existing rules prohibit providing false information about revenues and expenses in financial reports (Weygandt et al., 2021). This data serves as the basis for planning the budget, the health of the economy, particular markets, and the overall tendencies. Mispresenting the company and its financial situation, Zoe might also affect other firms who depend on this information. Furthermore, ethical accounting implies observing the existing rules; otherwise, there is a risk of being punished. For this reason, accrued revenues and deferred expenses should be viewed as illegal in this case.
Who can discover Zoe’s accrued revenues and deferred expenses?
Manipulating financial data is one of the frequent violations used by managers for various purposes. For this reason, there are numerous authorities and methods to detect such cases. First of all, the IRS, as the federal agency overseeing the collection of taxes and enforcement of corresponding laws, might discover the attempts to provide false information and provide appropriate punishment (Weygandt et al., 2021). Other accountants can also investigate the situation and find the intention to defer expenses because of their experience. Second, shareholders might also notice the accrued revenues by analyzing available financial data and researching it. Finally, using its controlling tools, the government can also discover this manipulation and initiate a comprehensive investigation of the situation, which will result in the deterioration of the company’s image.
Altogether, it is possible to conclude that Russell Company’s case demonstrates the unacceptability of providing false financial information. Regardless of the motifs, managers or accountants cannot use such practices as they are unethical and might affect various stakeholders. Moreover, following the existing legislation, they can also be viewed as illegal and violating the major accounting principles. For this reason, Zoe should have warned the president about the impossibility of such actions and insisted on providing relevant information.
Weygandt, J., Kimmel, P., & Kieso, D. (2021). Accounting principles (14th ed.). John Wiley & Sons, Inc.