Question

Read the scenario below, and address the subsequent requirements.

Emma is the plant manager of an electronics company. Plant managers are paid a salary and get an additional bonus equal to 5% of their base salary if their division meets or exceeds target profits for the year. The bonus is determined after the company’s annual financial report has been prepared and issued to shareholders.

Emma’s division uses a process costing system where the estimate of the percentage completion of ending work in process inventories affects the unit costs of finished goods and therefore the cost of goods sold. (All units completed and transferred out of the final processing department were sold.)

Emma just received preliminary profit figures for her division which show it is within $200,000 of making the year’s target profits. To earn her bonus, Emma simply needs to convince James, her lead production supervisor, to increase the estimate of the percentage complete of ending work in process inventory. James has already submitted the percentage completion figures to corporate headquarters.

In your post, address the following questions:

1. What are the ethical issues in this process costing environment? What are the risks?

2. Do you think Joe should go along with Emma's request to alter estimates of the percentage completion? Why or why not?

Answer 1

Ethical issues in this process costing environment

The four major factors that can cause ethical problems in the workplace are lack of integrity, organizational relationship problems, conflicts of interest, and misleading advertising They violated each of the four areas that can cause immense ethical problems

Businesses affect the environment through the extraction and utilisation ofenvironmental resources, and through pollution that is released through these processes.Businesses positive environmental effects can be seen as the reverse, they can create environmental resources and reduce pollution

There are three major types of environmental costs:1) compliance,2 preventive, 3) green.

The first step in evaluating expenses is to establish topics for data collection, such as cost types, process categories, environmental management, and process steps.Recently, organizations of all sizes and complexities have started to examine new ways to evaluate their cost information, including capital and operating expenses. Controlling these expenditures, especially overhead costs such as those associated with environmental management, has become an important management consideration.

Identification and elimination of unnecessary environmental, health, and safety EHScosts offer a company many opportunities to improve the bottom line. In addition, companies undertake EHS activities to comply with a myriad of local, state, and federal regulations. The development of an environmental management system and adequate, timely information with which to make decisions lead to the elimination of unnecessary environmental expenses through the adoption of pollution prevention initiatives and best manufacturing practices.

Know the numbers

Methodology

Sample system

Environmental cost categories

Cost type

Capital equipment

depreciation

Disposal, hazardous

Disposal, nonhazardous

Expensed equipment

Joe should not go along with Emma's request to alter estimates of the percentage completion

Joe should follow ethical of percentage completion

Importance of Accurate Financial Statements for Organizations

1. Financial Transparency:

2. Evaluate Tax Liability:

3. Build Trust:

5. Improved Payment Cycles:

6. Better Decision Making, Planning and Forecasting.

  The risks are:

The 10 most significant risks and costs from unethical behavior

(1) Increased risk of doing business and the possibility of bankruptcy and severely damaged company brand and image.

(2) Decreased productivity.

(3) Increased misconduct and conflict internally.

(4) Decreased performance levels of employees.

(5) Increased employee turnover and more challenging employee recruitment.

(6) Decreased success of retention and recruitment of employees.

(7) Increased absenteeism and “presenteeism” the tendency to stay at work beyond the time needed for effective performance on the job.

(8) Decreased probability of reporting misconduct and unethical behavior of others.

(9) Increased dysfunctional behaviors such as not paying attention to details, scapegoating, withholding information, under delivering and overpromising, not giving credit to others, lowering goals, misrepresenting results, etc.

(10) Decreased value of the company.

Financial statements open a window for educated decision-making and strategic planning. The working capital statements, fund flow statements, cash flow statements, and trading account all have to be consulted every day for evaluating how much money the company is making, how much money they need, the reserves that they need to set aside, and how they propose to increase sales and boost financing.

The above-mentioned points emphasize why it is imperative that companies strive to maintain the accuracy of their financial statements. Following GAAP or other applicable accounting standards to generate these statements is a critical factor in ensuring they present the actual financial picture of the business to management and external stakeholders.

Certified financial statements contain a statement of opinion from an auditor, in which the auditor states that it is his or her opinion that the financial statements were prepared in accordance with GAAP and that no material information was left undisclosed. If the auditor has any doubts, then a qualified or adverse opinion statement is written.

Annual reports to stockholders must also contain management's discussion and analysis of the firm's financial condition and results of operations. Information contained therein includes discussions of the firm's liquidity, capital resources, results of operations, any favorable or unfavorable trends in the industry, and any significant events or uncertainties. Other information to be included in annual reports to stockholders includes a brief description of the business covering such matters as main products and services, sources of materials, and status of new products. Directors and officers of the corporation must be identified. Specific market data on common stock must also be supplied.