Analysis of Ethical Issues in Accounting: Linbarger Company

This assignment focuses on ethical considerations within the field of accounting, particularly concerning financial reporting and adherence to loan agreements. The scenario presents a case study involving the Linbarger Company, which faces a critical issue with its cash balance falling below the required minimum stipulated in its loan agreement with an insurance company. The assignment requires an analysis of the ethical implications of manipulating the financial records to meet the loan requirements, considering the impact on stakeholders, and exploring alternative solutions. The student addresses questions related to ethical conduct, the consequences of non-compliance, and strategies to maintain ethical standards while ensuring the company's financial stability. The assignment underscores the importance of truthful and reliable financial reporting in maintaining a sound economy and ethical business practices.

Running head: ETHICS IN ACCOUNTING
ETHICS IN ACCOUNTING
Name of the Student
Name of the University
Author Note

1ETHICS IN ACCOUNTING
Answer to Question 1
The primary accounting problem which is being faced by Linbarger Company can be
stated to be the problem related to the maintenance of the cash balance of the firm. The
organization has taken a huge loan from the insurance company and in lieu of this, the firm is
required to maintain a minimum cash balance of $200000. However, on the day on which the
accounting book is closed on the 30th of June, the accounting reflects a cash balance of $80000
which can be considered to be very low and hence, it can be stated that the firm is not in a
position to clear its creditors or receive money from its debtors on time (Cameron & O'Leary,
2015). Additionally, it is also not being able to maintain and abide by the loans which have been
taken by the firm as the organization failed to maintain the additional balance of $120000 which
is required to be maintained as a default of the loan from the insurance firm. The company is not
being able to maintain its debtor and creditors cycle.
Answer to Question 2
In the field of Finance and Accounting there exist certain ethical considerations which are
required to be abided by the organization and the books of the accounts are required to be
maintained accordingly (Libby, 2017). However, in the case of the Linbarger Company, it can
be clearly understood that, there tends to exist a problem related to the cash balance of the firm
and with respect to this, two crucial ethical conditions are highlighted. In the first case, the firm
is not being able to maintain the overall cash balance which it is required to maintain and in lieu
of this the overall operations of the firm can be stated to be in question. Secondly, according to
Mintz (2016), the books of accounts are to reflect the true performance of the firm and not hide
any fact. For this, if Lisa fails to report this and asks the firm to extend a day, it can be

2ETHICS IN ACCOUNTING
considered to be an action against the ethics of the financial statement and on the other hand, can
be considered to be a flaw in the agreement between the firm and the insurance company`s
agreement.
Answer to Question 3
In case, the instruction of the Manager, Lisa is not followed then the books of accounts
will be maintained in the way which it is usually maintained and closed on the day on which it is
usually closed which can be stated to be the last day of the month, then the company may end up
in a default of the contract in which it is engaged in with the Insurance company (Lee & Sohn,
2017). This is because, it is the basic formality of the contract between the insurance firm and the
Linbarger Company that, as the firm has taken a loan from the insurance firm, it will be required
to maintain a cash balance of $200000 on the last day of the month. In case on any month, they
are unable to do so, then the contract between the two firms will be on default and the insurance
firm would lose out on their jobs as it will become easier for them to close the firm down.
Answer to Question 4
In case Lisa`s instructions are abided by then, the main sufferers of the entire system may
be the organization itself. This is because, the firm is not being able to abide by the ethical
framework of finance and the financial statements will not be providing the true and fair
statement of the firm (Duska, Duska & Kury, 2018). In addition to this, following this, the
different investors and stakeholders of the firm will also not be receiving the correct information
which will enable them to make the right decision as per the organization. Hence, with respect to
this, it needs to be understood that, in case these changes to the accounting system will be done
then, the firm and its relationship with the different stakeholders will be greatly affected.

3ETHICS IN ACCOUNTING
Answer to Question 5
One of the alternatives which the firm can opt for in the particular scenario can be
suggested to be the strategy of receiving the different checks of a later date on the last day of the
firm. In this case, the organization can make a request to its different consumers to pay them on
the last day of the month or instead take checks which are postdated on the last day of the month
(Cañibano, 2018). Either one of strategies would ensure that the firm is able to be successful. In
this scenario, the firm at present can transfer some cash to their balance in order to ensure that
the balance is met with.

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References
Cameron, R. A., & O'Leary, C. (2015). Improving ethical attitudes or simply teaching ethical
codes? The reality of accounting ethics education. Accounting Education, 24(4), 275-290.
Cañibano, L. (2018). Accounting and intangibles. Revista de Contabilidad-Spanish Accounting
Review, 21(1), 1-6.
Duska, R. F., Duska, B. S., & Kury, K. W. (2018). Accounting ethics. Wiley-Blackwell.
Lee, B. K., & Sohn, S. Y. (2017). A credit scoring model for SMEs based on accounting
ethics. Sustainability, 9(9), 1588.
Libby, R. (2017). Accounting and human information processing. In The Routledge Companion
to Behavioural Accounting Research (pp. 42-54). Routledge.
Mintz, S. (2016). Giving voice to values: A new approach to accounting ethics education. Global
Perspectives on Accounting Education, 13(1), 37-50.