Acc 450 Case 1
1. With such a difficult decision, the anonymous caller could either report the fraudulent financial statements or go along with top management and risk being caught or being blamed for the misstatements. It is possible that the caller would face legal trouble at some point in the future if she decided to sign off on the statements. If the bank were to discover the overstated financials, the extended credit would be immediately revoked. It is necessary for the caller to evaluate all of the possible scenarios and ultimately come to a decision that corresponds to the law as well as her own moral standards.
The group first recommends that Dr. Mitchell instructs the caller to gather any evidence she has proving the statements to be false. To avoid any false accusations, she should print out the documentation of the misstated financials and place them in a secure location. She should then sit down with senior management and point out the mistakes in the financials. It would be important for her to advise management that all revenue must be realizable and earned before it can be recognized by GAAP. Management may simply not be aware of the GAAP regulations since they do not have a background in accounting. If she points out the consequences the company could face if the fraudulent statements were discovered, management may decide to follow the law. To protect the accounts payable clerk/student, the caller should acquire a statement from the clerk proving that the clerk was also concerned about the false transactions. The caller should always document any meetings and any contact with management. There are a few risks involved by continuing to work with the company. One short term risk is continued hostility with senior management. Since management knows the caller is concerned with the fraudulent activity, her job could be at risk. Even if the problem is resolved, the caller knows the integrity of the top management showing that more fraudulent behavior
The group first recommends that Dr. Mitchell instructs the caller to gather any evidence she has proving the statements to be false. To avoid any false accusations, she should print out the documentation of the misstated financials and place them in a secure location. She should then sit down with senior management and point out the mistakes in the financials. It would be important for her to advise management that all revenue must be realizable and earned before it can be recognized by GAAP. Management may simply not be aware of the GAAP regulations since they do not have a background in accounting. If she points out the consequences the company could face if the fraudulent statements were discovered, management may decide to follow the law. To protect the accounts payable clerk/student, the caller should acquire a statement from the clerk proving that the clerk was also concerned about the false transactions. The caller should always document any meetings and any contact with management. There are a few risks involved by continuing to work with the company. One short term risk is continued hostility with senior management. Since management knows the caller is concerned with the fraudulent activity, her job could be at risk. Even if the problem is resolved, the caller knows the integrity of the top management showing that more fraudulent behavior