George's Dilemma: During the last week of December 2019, George, controller for We 'R" Appliances, received a memo from the firm's president, Jane Anderson. The memo stated that Anderson had negotiated a very large sale with a new customer and directed George to see that the order was processed and the goods shipped before the end of the year (12/31). Anderson noted that she had to depart from the usual credit terms of n/30 and allow terms of n/60 to cinch the sale. Although, the credit terms were unusual for the company, George was particularly pleased with the news because business had been somewhat slow. The goods were shipped on 12/29 and the sale was incorporated into the 2019 financial data. It is now mid-February 2020, and two events have occurred recently that, together, cause George concern. First, George was inadvertently copied on a letter from the firm's bank to Anderson. The letter stated that the bank had reconsidered its decision to deny a loan to the company and is now granting the loan based on the new, and favorable, sales date supplied by the president. The bank was "particularly impressed with the sales improvement shown in December." Although George had been involved in the initial loan application that was denied, he had been unaware that the president had reapplied for the loan. The second event was that all of the goods shipped on December 29, 2019, to the new customer had just been returned.
George's Dilemma: During the last week of December 2019, George, controller for We 'R" Appliances, received a memo from the firm's president, Jane Anderson. The memo stated that Anderson had negotiated a very large sale with a new customer and directed George to see that the order was processed and the goods shipped before the end of the year (12/31). Anderson noted that she had to depart from the usual credit terms of n/30 and allow terms of n/60 to cinch the sale. Although, the credit terms were unusual for the company, George was particularly pleased with the news because business had been somewhat slow. The goods were shipped on 12/29 and the sale was incorporated into the 2019 financial data.
It is now mid-February 2020, and two events have occurred recently that, together, cause George concern. First, George was inadvertently copied on a letter from the firm's bank to Anderson. The letter stated that the bank had reconsidered its decision to deny a loan to the company and is now granting the loan based on the new, and favorable, sales date supplied by the president. The bank was "particularly impressed with the sales improvement shown in December." Although George had been involved in the initial loan application that was denied, he had been unaware that the president had reapplied for the loan.
The second event was that all of the goods shipped on December 29, 2019, to the new customer had just been returned.
Please address what should George do? What can't George do?
From the facts given in the case, it can be inferred that the sales have been purposefully manipulated by the President to show inflated sales. The intent of the President was to get a loan from the bank approved which had been previously denied because of the low sales performance of the company.
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