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Topic:

Misstatements of Funds and the Ethical Dilemma and Considerations

Essay Instructions:

Assignment: Ethics in Accounting
Instructions:
Read the following scenario.
Answer the questions that follow. This will be a 2-3 page submission in a question and answer format (also in paragraph form). An introduction and conclusion is not required.
Refer back to your textbook for guidance on how to think through the scenario.
You have been recently hired as an assistant controller for XYZ Industries, a large, publically held manufacturing company. Your immediate supervisor is the controller who also reports directly to the VP of Finance. The controller has assigned you the task of preparing the year-end adjusting entries. In the receivables area, you have prepared an aging accounts receivable and have applied historical percentages to the balances of each of the age categories. The analysis indicates that an appropriate estimated balance for the allowance for uncollectible accounts is $180,000. The existing balance in the allowance account prior to any adjusting entry is a $20,000 credit balance.
After showing your analysis to the controller, he tells you to change the aging category of a large account from over 120 days to current status and to prepare a new invoice to the customer with a revised date that agrees with the new category. This will change the required allowance for uncollectible accounts from $180,000 to $135,000. Tactfully, you ask the controller for an explanation for the change and he tells you “We need the extra income, the bottom line is too low.”
Required:
In a 3-page paper, discuss the following:
1. Consider what you have learned relative to ethics and financial reporting. What is the rationale for the calculations/process used to estimate the $180,000 uncollectible allowance?
2. How do you think the misstatement of funds will impact the income statement and balance sheet?
3. What is the ethical dilemma you face? What are the ethical considerations? Consider your options and responsibilities as assistant controller.
4. Identify the key internal and external stakeholders. What are the negative impacts that can happen if you do not follow the instructions of your supervisor?
5. What are the potential consequences if you do comply with your supervisor’s instructions? Who will be negatively impacted?
Additional Requirements:
Use at least one (1) quality academic resource (in addition to your textbook) for this assignment. Note: Wikipedia and similar websites do not qualify as academic resources. You have access to Strayer University’s Online Library at https://research(dot)strayer(dot)edu and the iCampus University Library Research page at https://icampus(dot)strayer(dot)edu/library/research.
Your assignment must follow these formatting requirements:
Your paper should be double spaced (Arial or Times Roman 12 pt font) and follow general Strayer Writing Standards (SWS) as they relate to references and citations. Please take a moment to review the SWS documentation for details (more information and an example is included in the Strayer Writing Standards menu link located in your Blackboard).
Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

Essay Sample Content Preview:
Consider what you have learned relative to ethics and financial reporting. What is the rationale for the calculations/process used to estimate the $180,000 uncollectible allowance?
The rationale, in this case, is ensuring the full disclosure of probable bad debts that the organization may encounter in the future. It is evident in the field of accounting that the GAAPs must be applicable for the purposes of ensuring that all financial statements provide accurate, trustworthy information without any material manipulation of the financial data (Jaijairam, 2017).
It is important to note that accountants utilize two methods for the purposes of estimating uncollectible accounts for a period. One of the methods focuses on the income statement as well as the sales relationship of uncollectible allowance known as the percentage of sales method. The other method focuses on the use of the balance sheet that shows the percentage of the receivables method. The relationship of focus, in this case, is the accounts receivable relationship. The percentage of receivables way, on the other hand, estimates uncollectible accounts by determining the desired size of the allowance. In this case, a company may utilize a different rate for each receivable or an overall scale. In this case, the percentage of receivables method was utilized for the purposes of determining the $180,000 as of the desired allowance (Jaijairam, 2017).
In this case, the target balance estimate is $ 180,000, in this case the bad debt expense balance for the year is calculated as follows:
Bad Debt expense = Estimated balance – Unadjusted Allowance for uncollectible (credit)
= 180,000 – 20,000
= $ 160,000
However, in the case where the target balance is under-estimated, then the bad debt expense would be given as: $ 135,000 – 20,000 = $ 45,000. This is what the controller wants to be provided wrongfully.
Misstatement of funds
The preparation of the financial statements reveals the organization’s transaction within a fiscal year. The financial years of different organizations vary with time, one of the examples of the financial statement is the balance sheet. This shows the financial position of the company by comparing assets and liabilities. The income statement, also referred to as the profit and loss account, shows the organization’s operational results. The balance sheet will not balance since the assets and the liabilities will not be equal. On the other hand, the income statement will be affected since the p...
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