Business Ethics: Survive the Year 
ACCOUNTING MINICASE: ACCT – 13
TEACHING NOTES
BUSINESS ETHICS PROGRAM
Survive the Year
Teaching Notes
What Are the Relevant Facts?
3.
Not make the allowance adjustment but provide information to the auditor that will effectively lead to revealing the uncollectability of the Ender account. Chris and Robin, the CEO, know a material receivable is probably uncollectable, but no adjustment to the allowance account has yet been made. 4.
Make a partial adjustment for the uncollectable receivable balance.
Robin, the CEO, fears that booking the allowance adjustment will cause the auditor to report the construction company’s shaky financial position in the audit report.
•
1.
The company for which Chris is controller is facing financial difficulties and needs a bank loan to continue in existence.
2.
3.
4.
Without a clean audit opinion, the bank will likely refuse the loan, and the construction company may fail. What Are the Ethical Issues?
1.
2.
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•
•
•
The primary issues for Chris are honesty, integrity, personal reputation, and professional responsibility to the company, auditor, and the bank, versus the welfare of the company and its owners and employees. Can Chris represent the Ender receivable without jeopardizing the bank loan application and without violating professional standards?
Who Are the Primary Stakeholders?
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•
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What Are the Ethics of the Alternatives?
Chris, the controller
Robin, the CEO
Employees and stockholders of the construction company The bank that is evaluating the loan application
The auditor
Ender Corporation
•
2.
Make the allowance adjustment for the total expected uncollectable and/or be straightforward with the auditor about Ender’s receivable.
1992 Arthur Andersen & Co, SC. All rights reserved.
What are the benefits and costs to each stakeholder? 2.
Do the benefits of getting the bank loan outweigh the possible costs to Chris and the company? Based on a “rights” perspective, for each alternative: 1.
What are the
TEACHING NOTES
BUSINESS ETHICS PROGRAM
Survive the Year
Teaching Notes
What Are the Relevant Facts?
3.
Not make the allowance adjustment but provide information to the auditor that will effectively lead to revealing the uncollectability of the Ender account. Chris and Robin, the CEO, know a material receivable is probably uncollectable, but no adjustment to the allowance account has yet been made. 4.
Make a partial adjustment for the uncollectable receivable balance.
Robin, the CEO, fears that booking the allowance adjustment will cause the auditor to report the construction company’s shaky financial position in the audit report.
•
1.
The company for which Chris is controller is facing financial difficulties and needs a bank loan to continue in existence.
2.
3.
4.
Without a clean audit opinion, the bank will likely refuse the loan, and the construction company may fail. What Are the Ethical Issues?
1.
2.
•
•
•
•
The primary issues for Chris are honesty, integrity, personal reputation, and professional responsibility to the company, auditor, and the bank, versus the welfare of the company and its owners and employees. Can Chris represent the Ender receivable without jeopardizing the bank loan application and without violating professional standards?
Who Are the Primary Stakeholders?
•
•
•
What Are the Ethics of the Alternatives?
Chris, the controller
Robin, the CEO
Employees and stockholders of the construction company The bank that is evaluating the loan application
The auditor
Ender Corporation
•
2.
Make the allowance adjustment for the total expected uncollectable and/or be straightforward with the auditor about Ender’s receivable.
1992 Arthur Andersen & Co, SC. All rights reserved.
What are the benefits and costs to each stakeholder? 2.
Do the benefits of getting the bank loan outweigh the possible costs to Chris and the company? Based on a “rights” perspective, for each alternative: 1.
What are the