Ethics Writing Assignment
Nebobites Ethical Dilemma
1. This case involves a small public traded company named Nebobites, which manufactures dog treats. Jenny O., CPA, is the new Assistant Controller for the Nebobites’ company, and her job is to review and audit the financial statements for the 2012 year. While reviewing the financial statements, Jenny noticed the company’s Allowance for Doubtful Accounts balance seemed significantly higher than in the past. This increase in the Allowance account was due to the Bad Debt Expense estimation being based off 3% of net credit sales instead of the prior years’ estimate of 1.5%. The increase in Bad Debts expense as a result of the increase in estimate materially affected the 2012 earnings.…show more content… Although she will eventually have to find a new job, this choice may save her from being in trouble with the law and potentially boost her chances of finding a new job due to her discovery at Nebobites. Another final option that I would see plausible in this situation would be to simply quit, if the Controller did not want to change the estimation and swear on the financial statements. The legal risk is too high in the case, and you do not want the downfall of Nebobites to be on your shoulders.
5. By deciding to go along with the inappropriate change in estimate, Jenny’s job may be safe for the time being, but in the long run, Jenny and the company may be audited in the future exploiting their mistakes made in the 2012 financial statements. This could cause Jenny to be immediately terminated when the mistakes were finally found, as well as the possibility of jail time after an investigation and trial. This is morally and legally wrong because she knowingly goes against corporate policies and the generally accepted accounting principles in order to reap the benefits.
By reporting the inappropriate practices to an outsider’s attention, such as an external auditing firm, she could save her job possibly for the time the company is being investigated, but may later be fired. Although she will eventually have to find a new job, this choice may save her from being in trouble with the law and potentially boost her chances of finding a new job due to her