University Ethics Report: Financial Reporting and Ethical Dilemma

This report analyzes an ethical dilemma involving a company's CFO instructing a controller to manipulate financial statements by recording revenue in the wrong period. The report highlights the unethical nature of this action, as it violates accounting principles and ethical standards. It discusses the potential motivations behind such unethical behavior, such as improving the company's financial appearance to attract investors. The report emphasizes the crucial role of accountants in maintaining ethical standards and the importance of adhering to professional codes of conduct, such as the International Financial Reporting Standards. The report also references relevant literature to support its arguments and provide a deeper understanding of the ethical issues involved.

Running head: COMPANY ETHICS
Company Ethics
Student’s Name:
University Name:
Author Note

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COMPANY ETHICS
The scenario presented in the question is that Tommy Hubbs is the controller of the
XYZ Corporation. In the recent times, Hubbs was instructed by the CFO of the company,
Carol Franks to record $100000 in revenue at the end of the financial year 2010, even if the
actual sale was incurred in January 3, 2011 that is in the next financial year.
The situation described in the question is definitely unethical and should not be
committed. If the revenue incurred by XYZ Corporation is a certain amount then that
particular amount should be reflected in the financial statements of that financial year. Carol
Franks being the CFO of the company has the authority to instruct or deliver orders to his
subordinate, as he is in the top order hierarchy but ethical standards are and should be same
for everyone irrespective of the positional hierarchy of an individual in an organization.
When Carol Franks asks Tommy Hubbs to make an illegitimate entry of $100000, the entire
action is unethical and may fall under the domain of material misstatement.
This is because if Tommy Hubbs surrenders to the unjustified demand of his boss then
there are several ways by which he can increase the revenue by $100000. Tommy might
understate or overstate a particular account or a number of accounts in order to adjust the
amount of $100000. Tommy also might create fake credit accounts showing income or gains
in order to adjust for the increased profit (Ford and Richardson 2013).
For instance the accounts receivable account may be overstated or an outstanding
income may be created out of the blue so that the amount of $100000 can be entered. Now to
understand why Carol Franks asked Tommy to perform such an unethical task, the reason
being that the total revenue incurred by a particular firm if less consistently, poses a negative
image of the organization in the market. This might lead to loss of interest among the
investors and stakeholders and ultimately result in decrease in investment in the company.
Similarly Carol Franks in order to lure new investors or keep a hold of the existing

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COMPANY ETHICS
shareholders has asked Tommy Hubbs to commit the unethical task (Ford and Richardson
2013).
The role of accountants is very important in society as they are the primary point of
touch between the financial authorities and the general public. The financial statements
prepared by an accountant is the basic structure upon which economic decisions are taken
that is the entire economy depends on the financial reports of different institutions (Crane and
Matten 2016).
Tommy Hubbs being a certified public accountant should not obey the order given to
him because the responsibility of leading an economy towards a better future lies in his
hands. The International Financial Reporting Standard also consists of laid down ethical
standards which should be adhered to by every company. Ethical obligations are such that it
cannot be constrained by legal procedures, so it entirely depends on an individual and his or
her conscience (Crane and Matten 2016).

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COMPANY ETHICS
References
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Ford, R.C. and Richardson, W.D., 2013. Ethical decision making: A review of the empirical
literature. In Citation classics from the Journal of Business Ethics (pp. 19-44). Springer
Netherlands.