Abstract
This report starts with stating and discussing the stakeholders in the given case study, the shareholders, Management, and employees, to mention a few. It will also focus on the directions given to Zoe, who is in charge of the organization’s accounting books, to adjust some entries in the book. This report states that those actions by Zoe are not only unethical but also illegal. It further proceeds to point out scenarios where the adjustment of figures in the accounting books can be ethical and legal. The conclusion of this report points out who can quickly discover the adjustment on the accounting books, which is the organization’s auditor.
Information Systems Report
A stakeholder is a person in a business entity or an organization who has an interest in the proceeding of the organization. Stakeholders are directly or indirectly involved in the organization, either running or benefiting from its activities. In the given case study, the stakeholders are the organization’s shareholders, who are the people who have invested their money in the organization and stand to benefit from the organization in terms of dividends due to the sales made by the organization in a year. In our case study, the shareholders will be affected by a decision to change the organization’s profitability since the change directly affects the company’s stock prices. A drop or a rise in stock prices will affect the shareholders directly as their dividends will rise or fall, respectively.
The Management of the organization in our case study is also a part of the stakeholders as they are involved in the decision-making of matters concerning the day-to-day running of the organization. The Management also makes account-related decisions which include adjustments in the accounting books. Finally, secondary stakeholders in the organization are the employees; their daily work enables the company to run smoothly and achieve its goals and expectations. The vendors in this organization are parties in the supply chain that avail goods and services to the final consumers and companies. A vendor is a person or organization that makes the goods available to the consumers and not necessarily the manufacturer. The last category of stakeholders is the lenders. They are individuals or groups, both public and private, who makes funds available to persons or business with the sole expectation that the money will be repaid with interest hence making a profit through it.
In our case study, the president requests Zoe Baas, the controller of the company accounting books, to accrue every possible revenue. To forego as many expenses as possible and preserve the current year’s revenues so that the following year can easily absorb the costs foregone in the current year. In this scenario, the presidents’ requests go against prudent accounting policies. They can be seen as an attempt by the Management to window dress by manipulating the organization’s accounting books entry and posting better profit numbers than the actual ones (Weygandt et al., 2018). Concerning accounting policies, this action is unethical, as well as the acts by Zoe to date the entries in the accounting books to December 31 of the previous year instead of January 17. These actions are done to adjust the organization’s accounting figures, which inflates its revenue by illegally accruing some of its revenues and deflating its expenses by wrongly delaying some costs. These are wrong, unethical, and illegal since they do not follow the rules and policies of accounting.
One of the questions that arise in our case study is whether Zoe is still ethical by deferring the company’s expenses and accruing the company’s revenues. These actions can only be ethical if they are done as provided in the accounting provisions and the GAAP and IFRS framework (Weygandt et al., 2018). Any accruing of the organization’s revenue and differing expenses done in any other way without following the rules will be illegal. An example is when sales have been done and have not been recorded using the standard method of invoicing paperwork, as accrued sales are legal (Weygandt et al., 2018). Another example of an unethical case is when a customer pays for goods in advance and will be shipped the following year, recording such sales as accrued.
Another issue from the case study where the manager asks Zoe to defer expenses and accrue revenues is that those actions can be illegal. In this case study, Zoe can still be legal if the deferring of the company’s costs and accruing of the company’s revenues are done as provided in the accounting policies and following the GAAP and IFRS framework. It is also legal only when Zoe does not violate federal and IRS regulations (Weygandt et al., 2018). In any case, if those adjustments in the accounting books violate these regulations, they will be illegal. In our case study, the adjustments the manager instructed Zoe to make in the accounting books do not follow these regulations; hence they will be unlawful.