Question

Read the following scenario and complete the questions and tasks below.

Marcy recently started her first job after graduating from business school with her accounting degree. She is very excited to be working in her field and although she knows she still has a lot to learn, she already feels like she is getting a good feel for what it takes to be successful. She has been assigned to work under one of the senior accountants, Mrs. Bradlee, and so far, she has been easy to work with and very helpful. For the last several weeks Marcy has spent most of her time entering data into the firm’s computer system in preparation for the issuance of their clients’ annual reports. On Friday, as she is preparing to leave for the day her supervisor calls her into her office.

“Well, Marcy, still enjoying your work here with us?” Mrs. Bradlee asks.

“Oh, yes ma’am, very much. I know I am still new and have a great deal to learn, but I am very happy with my job,” Marcy replies.

“That’s good to hear, Marcy. We are all very happy that you are here and I think you will be a valuable asset to the firm. In fact, I have something that I would like for you to do for me. I understand you are available to work over the weekend, is that correct?” Mrs. Bradlee inquired.

“Yes, I am happy to come in over the weekend if you need me to!” Marcy replied.

“Excellent,” Mrs. Bradlee said as she pulled a folder from her desk drawer. Handing the folder to Marcy she continued, “we identified some errors in the data that was entered for the Dale account and I would consider it a personal favor if you could get these numbers corrected over the weekend. I have already taken the liberty of alerting building security so you won’t need to worry about getting into the office. I don’t expect anyone else to be here, are you okay with being in the office alone?”

Marcy took the folder from Mrs. Bradlee’s outstretched hand and opened it to see what she had committed to. There were several pages of entries to be corrected, but Marcy breathed a sigh of relief when she realized that the work was not that different from what she had been doing for the last several weeks.

“Oh, I will be just fine. I should be able to get all of these corrections made in a few hours, ma’am.” Marcy said.

“Well, then, that’s that,” said Mrs. Bradlee, smiling at Marcy.

Taking that as her queue to leave, Marcy gathered up the folder and her belongings and headed towards the door. Just as she got to the door Mrs. Bradlee spoke again.

“Oh, and Marcy, I would appreciate it very much if you didn’t discuss this matter with your colleagues. It, um, might be an embarrassment to Mark Murphy. He made the original entries and I would hate for him to look bad in front of the other junior partners. You understand I’m sure.” Mrs. Bradlee said.

“Of course, Mrs. Bradlee, I wouldn’t want Mr. Murphy to be put in a bad position. He has been very helpful and I really like him.” Marcy replied.

“Then it’s settled. If you just get these few minor corrections made over the weekend we will be back on track to get the Dale annual report out on time. And please make sure that you put in overtime for your hours. I will sign off on them personally on Monday morning.” Mrs. Bradlee said as she turned her attention to the stack of phone messages on her desk.

Marcy thanked Mrs. Bradlee for giving her the opportunity to be of assistance as she walked out of her office, pulling the door closed behind her.

On Saturday morning Marcy got dressed and was seated at her desk at 8 am. As she waited for her computer to boot up, she began looking through the documents Mrs. Bradlee had given her the day before. There were several pages of entries that had to be made and it slowly dawned on Marcy that all of the entries had something in common – they either increased revenue or decreased an expense. Several of the entries re-classified long-term debt as capital improvements.

“Well, these entries will totally change the financial position of the company,” Marcy said to herself. “How could Mr. Murphy have made this many errors?” she thought. “Something about this isn’t right,” Marcie thought out loud. Slouching back in her chair she suddenly found herself liking her job and Mrs. Bradlee less than she did when she had gotten up that morning.

1. Putting yourself in Marcy’s position, what do you do next? Consider the outcome of her various courses of action and the long-term effects of her actions.
2. What are the implications of the work Marcy has been asked to perform? Consider all of the stakeholders of accounting information when responding.
3. Why would someone in Mrs. Bradlee’s position ask an employee to perform this kind of task?

Answer 1

1) Marcy should not make such entries, as it is apparent that Mrs. Bradlee has asked Marcy to fudge the as the amendments are related to changes in revenue and no proper backup has been provided. Such entries should have a proper backup to ensure that they are correct. Marcy should refrain from such act, as performing this could lead to fraud. Marcy should discuss this situation with somebody one level above Mrs. Bradlee or should take it up with audit committee, if she does not get a satisfactory resolution from management. Marcy can also report such an act to regulatory authorities by becoming a whistle blower.

2) Marcy has been asked to overstate revenues or understate expenses, this will lead to reflect gains more then the actual gains. This will impact various stake holders, as it will give a wrong profit figures to investors which might get induces in investing in the organisation, due to enhanced profits wrongly reported. This may also cause lenders to make a decision on the basis of fudged records of the organisation and they might end up lending more then the organisation's capacity to repay. This fudged data may also lead in suppliers giving more credit exposure to the organisation and may lead to bad debts of those suppliers and this representation of wrong figures also be reported to regulatory authorities, which will fail to take an action on time.

3) Mrs. Bradlee would have asked Marcy to perform such a ask, as she knows that Marcy is new to the organisation and she does not have a connect with many employees in the organisation, thus she asked Marcy to do such a task. She might be involved in fund embezzlement and now she wants to hide the embezzlement she has done.