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  • ACCT - Booking the Budget Case

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    Dharini Raje Sisodia
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    Maria and Andy, who are responsible for the accounting system at an HMO, have recorded sales numbers in the financial reports that are closer to budget projections than actual sales. This has been done at the request of executive officers Bob and Connie who are focused on positive sales results. Auditors will require adjustments to the inflated sales accruals. Maria and Andy must decide whether to inform Bob of their concerns about inaccurate reporting, develop a formal ethics committee, ascertain if the board is aware of the practice, or inform auditors who may already know about the practice. They risk potential firing if they decide to discuss issues with superiors.

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    Maria and Andy, who are responsible for the accounting system at an HMO, have recorded sales numbers in the financial reports that are closer to budget projections than actual sales. This has been done at the request of executive officers Bob and Connie who are focused on positive sales results. Auditors will require adjustments to the inflated sales accruals. Maria and Andy must decide whether to inform Bob of their concerns about inaccurate reporting, develop a formal ethics committee, ascertain if the board is aware of the practice, or inform auditors who may already know about the practice. They risk potential firing if they decide to discuss issues with superiors.

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    20 views1 page

    ACCT - Booking the Budget Case

    Uploaded by

    Dharini Raje Sisodia
    Maria and Andy, who are responsible for the accounting system at an HMO, have recorded sales numbers in the financial reports that are closer to budget projections than actual sales. This has been done at the request of executive officers Bob and Connie who are focused on positive sales results. Auditors will require adjustments to the inflated sales accruals. Maria and Andy must decide whether to inform Bob of their concerns about inaccurate reporting, develop a formal ethics committee, ascertain if the board is aware of the practice, or inform auditors who may already know about the practice. They risk potential firing if they decide to discuss issues with superiors.

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    of 1

    ACCOUNTING MINICASE: ACCT – 08 BUSINESS ETHICS PROGRAM

    TEACHING NOTES

    Booking the Budget


    Teaching Notes

    What Are the Relevant Facts?


    5. Maria and Andy can begin to look for new jobs.
    1. Maria and Andy have organized and are
    6. Maria and Andy can do nothing.
    responsible for the accounting system of the HMO.
    2. Bob and Connie, executive officers of the HMO, What Are the Ethics of the Alternatives?
    are mainly concerned with rosy sales results.
    1. Do readers of the newsletter have a right to expect
    3. Financial sales accruals have been recorded for unbiased financial reporting?
    numbers that are closer to budget projections than
    2. Do Maria and Andy have any obligations that
    actual sales.
    require them to prepare accurate interim financial
    4. Auditors reviewing the financial figures will reports?
    require adjustments to the inflated sales accruals.
    3. Does the board have a right to receive accurate
    financial reports?
    What Are the Ethical Issues?
    4. Do Maria and Andy have a right to be able to
    1. To what extent are Maria and Andy responsible to
    approach their superiors about an issue like this
    take action to curtail the recording of budgeted
    without fear of reprisal?
    sales?
    5. Is there an inequitable burden imposed on readers
    2. To what extent are the auditors responsible for
    of the financial data?
    supporting better interim accruals of sales?
    6. Is there an unfair benefit received by those who
    3. To what extent is there an obligation by the
    endorse the current financial reporting practices?
    company to ensure that only correct data about
    financial results is recorded and disseminated? 7. Is there a cost to the accounting profession from
    financial reporting of this nature?
    Who Are the Primary Stakeholders?
    What Are the Practical Constraints?
    • Maria
    • Andy 1. Everybody knows that interim reporting is “just a
    • Readers of the monthly newsletters bunch of estimates” anyway.
    • Possibly Connie, depending on his knowledge and 2. Maria and Andy have no authority to make the
    stand on the reporting practices decisions they want to make.
    • The board of directors
    3. Maria and Andy may be fired if they decide to talk
    What Are the Possible Alternatives? to Bob about their concerns.
    1. Maria and Andy can inform Bob of their 4. The auditors are hired by the HMO, and they may
    dissatisfaction. already be aware of the practice.
    2. Maria and Andy can start a process to develop a What Actions Should Be Taken?
    formal mechanism, i.e., an ethics committee, to
    consider ethical issues within the firm. 1. What action would you take if you were Maria or
    Andy?
    3. Maria and Andy can ascertain whether Connie and
    the Board are completely aware of the practice. 2. Which ethical theory (utilitarian, rights, justice)
    best justifies your decision?
    4. Maria and Andy can inform the auditors and ask
    them to make financial recommendations about the
    practice.

    1992 Arthur Andersen & Co, SC. All rights reserved. Page 1 of 1

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