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Linbarger Company: Ethics in Accounting Essay


Problem Identification

The accounting problem encountered by the Linbarger Company refers to the loan requirements set by the insurance company. In particular, Linbarger fails to keep $200,000 or more on its cash balance by June 30 that allows its insurance company to break an agreement and close the mentioned firm. The ethical considerations are associated with including one additional day in the receipt book. Since Lisa Infante, the financial vice president of Linbarger, expects to receive or $150,000 next day and the current cash balance is $80,000, there is a dilemma of whether to employ an unethical practice and counterfeit the document or to reject Lisa Infante’s instructions. Thus, from the ethical perspective, there are honesty, integrity, reliability, and professionalism. The violation of transparency that is especially important in the financial sphere is another ethical consideration that should be considered by an assistant controller. The mentioned points may be regarded as ethical considerations since they lead to financial misconduct and threaten both the company’s and employees’ reputation in terms of professional and personal codes of ethics.

Negative Impacts

In case the assistant controller would comply with the instructions of the financial vice president and wait one more day, it is possible to suggest that he or she would be fired because of insubordination and a failure to fulfill the loan agreement condition. It goes without saying that the above situation would also be unethical from the point of Infante, yet it is still possible. The company would keep its loan agreement and continue its performance, thus saving jobs and employees. If the falsification were discovered by the insurance company, the president of Linbarger, or any other interested party, Infante would be fired as well due to her incompetence. According to Needles, Powers, and Crosson (2014), companies are to have the internal control measures that imply the division of duties and responsibilities. In this case, one may observe the violation of the above guidance, since the financial vice president tries to share her responsibilities with the employee, thus forcing the assistant to decide. The business may suffer in this case as well. Since the check is in transit, Linbarger may receive in several days instead of one day. In this case, accounting standards would be violated if the accountant would record the check as a receipt.

If the assistant controller would not comply with Infante’s instructions, the company is likely to be closed, and employees are likely to lose their jobs. The assistant controller would be fired and, probably, judged for the document counterfeit. As the person who falsified the document, the accountant would be the only responsible subject. At the same time, Infante is likely to avoid the judgment as she just suggested the identified solution yet did nothing. Even though such bullying tactics applied by the financial vice president is unacceptable, her guilt would be difficult to prove. As stated by Trevino and Nelson (2017), ethics in accounting exists along with the general principles of morality, and it is characterized by specific features of human behavior in his or her financial activities. These specific norms include, on the one hand, the ethical foundations of professionalism, which should be consistently implemented in the relationships of specialists with the clientele serviced; on the other hand, ethical standards of behavior of the professional leader with his or her subordinates. From analyzing the identified case, it is evident that the financial vice president loses her integrity and fails to ensure professional behavior.

Among the other individuals who would suffer, one may note that the company would lose the trust of the insurance company and spot its reputation. The stakeholders and investors are also likely to be affected adversely as they would lose their funds. The collaboration with the insurance company would be interrupted.

Alternative

Communication is the alternative way to prevent the company failure and preserve jobs. First of all, it is essential to re-read the loan agreement as it may contain grace period to get money from the bank. It is possible to discuss the issue with the insurance company and ask for some time and purchase it. In case the above is impossible, or the company cannot afford the balance stated by the insurance company, negotiation should be applied to reduce the required balance to fit the business cash conversion cycle (Trevino & Nelson, 2017). As a rule, if the account has a good reputation, the grace period is given to the companies. The described solution is ethical and legal compared to the falsification of documents suggested by Infante. Therefore, the use of the presented alternative may help Linbarger to maintain its business and preserve good relationships with the insurance company and the law as well. In general, the analysis of the given case shows that unethical conduct has an adverse impact as on employees as well as on the company in general, thus making it clear that communication is the paramount strategy to discuss difficult situations and come up with relevant solutions.

References

Needles, B. E., Powers, M., & Crosson, S. V. (2014). Principles of accounting (12th ed.). Mason, OH: Cengage Learning.

Trevino, L. K., & Nelson, K. A. (2017). Managing business ethics: Straight talk about how to do it right (7th ed.). Hoboken, NJ: John Wiley & Sons.

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IvyPanda. (2020, October 11). Linbarger Company: Ethics in Accounting. Retrieved from https://ivypanda.com/essays/linbarger-company-ethics-in-accounting/

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"Linbarger Company: Ethics in Accounting." IvyPanda, 11 Oct. 2020, ivypanda.com/essays/linbarger-company-ethics-in-accounting/.

1. IvyPanda. "Linbarger Company: Ethics in Accounting." October 11, 2020. https://ivypanda.com/essays/linbarger-company-ethics-in-accounting/.


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IvyPanda. "Linbarger Company: Ethics in Accounting." October 11, 2020. https://ivypanda.com/essays/linbarger-company-ethics-in-accounting/.

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IvyPanda. 2020. "Linbarger Company: Ethics in Accounting." October 11, 2020. https://ivypanda.com/essays/linbarger-company-ethics-in-accounting/.

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IvyPanda. (2020) 'Linbarger Company: Ethics in Accounting'. 11 October.

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