FIN6004 What if a loyal accountant was asked to fudge some figures on behalf of their company, all while straining under a new mortgage?: Ethics Assignment, AU, UK

Assignment Task
What if a loyal accountant was asked to fudge some figures on behalf of their company, all while straining under a new mortgage?

Imagine that you are the Chief Financial Officer of a medium to large company. It is April and the Chief Executive Officer has just returned from a meeting with the company’s bankers. She calls you to her office to discuss the results of the negotiations. As things stand, the company requires a fairly significant injection of capital which will be used to modernise plant and equipment. The company has been promised new orders if it can produce goods to an international standard.

Existing machinery is incapable of manufacturing the required level of quality. Whilst the bank is sympathetic, current lending policies require borrowers to demonstrate an adequate current and projected cash flow, as well as a level of profitability sufficient to indicate a capacity to make repayments from an early date. The problem is that, largely because of some industrial problems, the business has not been performing at a level which realises even its ‘unimproved’ potential. Strictly speaking, the figures would not satisfy the bank’s criteria.

The CEO reminds you of all of this and then mentions that she has told the bank that the company is in excellent shape, that she believes that its financial results will meet the criteria and that she will ask the Chief Financial Officer (CFO) to deliver a financial report to the bank at the beginning of the next week. She tells you that it is up to you to decide upon the contents of that report.

Two final pieces of information; the CFO has recently purchased a home – leveraged with a significant mortgage. Failure to invest and gain the promised new orders is almost certain to lead to major retrenchments of personnel.

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