Nebobites Ethical Dilemma Essay

This wooing involves a sm all in all public traded high society named Nebobites, which manufactures dog treats. jennet O. , CPA, is the impudently Assistant mastery for the Nebobites companionship, and her business concern is to review and audit the monetary statements for the 2012 year. temporary hookup reviewing the monetary statements, Jenny noniced the companys wages for questionable Accounts balance seemed signifi messtly higher than in the past. This increase in the Allowance account was due to the k nonty Debt write down estimation being found off 3% of net credit sales instead of the forward years estimate of 1. %. The increase in Bad Debts expense as a result of the increase in estimate materially touch the 2012 earnings. However, 2012 had been a great year for earnings, so the additional expense did not disturb the earnings growth trend Nebobites had experienced in the past. However, upon that research, Jenny could find no exactlyification for the increa se in the Bad Debt Expense estimate from 1. 5% of net credit sales to 3%. Jenny limits to approach her boss, the Controller, Maxwell Devious.He tells Jenny he is awake of the practice known as income smoothing. Maxwell Devious says showing a steady growth in earnings was essential to keep the Nebobite cable price high as possible as the Smith family think to sell-off a significant number of sh ars in early 2014. Jenny feels passing uncomfortable with this practice, and she knows that this years financial statements exit retain an overdone Bad Debt Expense estimate and more than likely result in an unpretending Bad Debt Expense estimate in 2013. 2. An ethical termination must be made by Jenny, because she is going to have to try what is morally right or wrong.This fake presentation of increase in earnings willing potentially affect every stakeholder involved with the company including their sh beholders, creditors, management, employees and the customers. This faulty practi ce will submit an overstated Bad Debt Expense estimate for the year and more than likely result in an understated Bad Debt Expense estimate in 2013. Jenny needs to decide whether she thinks it is more important to look benefitable to investors and appear to have great wealth or is it more important to show creditors that they do not have sufficient bills to cover their debts.She withal knows that Maxwell Devious, the Controller, has an employee profit sharing plan, a management bonus plan based on earnings, significant bank loans out(a)standing and is planning on raising funds through a bond issue in 2014 all of these are affected by the earnings for the year. 3. By deciding not to variegate the estimate back to the appropriate percentage of 1. 5%, it does single out individuals and the upper management group.These individuals that are Jennys superiors simply do not emergency her to make the adjustment because it is in their crush involvement (looking profitable & perf ormance bonuses) and not in the company and its stakeholders best interest as a whole. It is also a legal colza because the companys CEO and other top-level personnel should swear that all financial data for the company is relevant and accurate, and they knowingly defy collective policies and the GAAP. 4. In this particular situation, Jenny is faced with a couple options roughly of which are favorable, others not so much.Jenny can choose to lodge by her scandalous boss, and decide to go along with the impertinent veer in estimate. This resource may blow over for the time being, scarcely in the long run, Jenny and the company may be audited in the future exploiting their mistakes made in the 2012 financial statements. This could cause Jenny to be immediately terminated when the mistakes were finally found, as well as the possibility of jail time after an probe and trial. Another possible course Jenny could take would be to report the contrasted practices to an removedrs attention, such as an external auditing firm.By doing so, she could save her job maybe for the time the company is being investigated, solely may later on be fired. Although she will eventually have to find a parvenu job, this choice may save her from being in trouble with the faithfulness and potentially boost her chances of finding a new job due to her stripping at Nebobites. Another final option that I would see plausible in this situation would be to simply quit, if the Controller did not want to change the estimation and swear on the financial statements.The legal danger is too high in the case, and you do not want the declivity of Nebobites to be on your shoulders. 5. By deciding to go along with the inappropriate change in estimate, Jennys job may be safe for the time being, but in the long run, Jenny and the company may be audited in the future exploiting their mistakes made in the 2012 financial statements. This could cause Jenny to be immediately terminated when the mistakes were finally found, as well as the possibility of jail time after an investigation and trial.This is morally and legally wrong because she knowingly goes against corporate policies and the generally veritable accounting principles in order to reap the benefits. By reporting the inappropriate practices to an outsiders attention, such as an external auditing firm, she could save her job possibly for the time the company is being investigated, but may later be fired. Although she will eventually have to find a new job, this choice may save her from being in trouble with the law and potentially boost her chances of finding a new job due to her discovery at Nebobites.By choosing this option, Jenny acts in a dignified and legal manner. She knows that she is doing what is right and is protecting stakeholders of the company. The other option of simply just resigning or quitting her position would not have much effect on the company. She is acting morally because she is not going along with the inappropriate practices of Nebobites, but she is not doing what is in the best interest for all stakeholders. The company will most likely find a new Assistant Controller for the operation who will go along with the unlawful scheme.This ultimately resulting in the downfall of the company, when Jenny could have prevented this and saved thousands of jobs by alerting an outside auditor. 6. By alerting an outside auditor to investigate this situation, Jenny does what is in the best interest for all stakeholders. This will eventually reveal the virtue and allow shareholders to see the negative affect on stock prices, creditors can be informed on the debt situation of our company and be conscious of the risk of dealing with us.Management will be disappointed with the actions of Jenny, in which they sacrificed their performance bonuses and will most likely fire her. The company will still have a chance to flourish, however, when the economy turns back around. By keeping t he inappropriate estimate, Jenny will most likely be in the praises of her superiors for the bonuses they received but, in the longer run, the companys financial statements will be inaccurate and liabilities to creditors will go unpaid.Shareholders will literal lose more money and the company has the potential to go impoverish any day if the economy does not take a sharp turn around. The top executives, as well as Jenny, should live in fear of being exploited of their misinterpretations and eventually will get caught up in severe legal trouble. If Jenny simply quit without seek outside assistance from auditors, she is still acting in a sensibly immoral and illegal manner. This is because the stakeholders of the company will inevitably still be in serious trouble due to the deception of Jenny and the upper management of the Nebobites company. . I believe that it is in the best interest for Jenny to consult an outside auditing firm. Although it could potentially make her lose her job when her superiors are notified, it enlightens all stakeholders involved with the Nebobites company. The risk is too great if Jenny decides to leave the inappropriate estimate as is she risks not only losing her job, but also risks going to jail, as well as losing her CPA license entirely. It is outlay far more in life to be an honest and true person who looks out for others than it is to be a deceitful and uncaring.