Textbook Problem

Ethics in Action

Rodgers Industries Inc. completed its fiscal year on December 31. Near the end of the fiscal year the company's internal audit department determined that an important internal control procedure had not been functioning properly. The head of internal audit, Dash Riprock, reported the internal control failure to the company's chief accountant, Todd Barley wine. Todd reported the failure to the company’s chief financial officer, Josh McCoy. After discussing the issue, Josh instructed Todd not to inform the external auditors of the internal control failure and to fix the problem quietly after the end of the fiscal year. The external auditors did not discover the internal control failure during their audit. In March, after the audit was complete, the company released its annual report, including associated reports by management. As chief financial officer, Josh authorized the release of Management's Report on Internal Control, which stated that the management team believed that the company’s internal controls were effective during the period covered by the annual report.

Did Josh behave ethically in this situation? Explain your answer.