Question

Ethics play a vital role in business and in the accounting profession. Here is an opportunity to connect you current learning about inventory with the profession’s commitment to ethics.

Tiffany Lyons was just hired as the assistant treasurer of Key West Stores. The company is a specialty chain store with nine retail stores concentrated in one metropolitan area. Among other things, the payment of all invoices is centralized in one of the departments Tiffany will manage. Her primary responsibility is to maintain the company’s high credit rating by paying all bills when due and to take advantage of all cash discounts.

Jay Barnes, the former assistant treasurer who has been promoted to treasurer, is training Tiffany in her new duties. He instructs Tiffany that she is to continue the practice of preparing all checks “net of discount” and dating the checks the last day of the discount period. “But,” Jay continues, “we always hold the checks at least 4 days beyond the discount period before mailing them. That way, we get another 4 days of interest on your money. Most of our creditors need our business and don’t complain. And, if they scream about our missing the discount period, we blame it on the mailroom or the post office. We’ve only lost one discount out of every hundred we take that way. I think everybody does it. By the way, welcome to our team!”

1.         What are the ethical considerations in this case?

2.         Who are the stakeholders that are harmed or benefited in this situation?

3.         Should Tiffany continue the practice started by Jay? Does she have any choice?

4.         Which Code of Conduct principle would you act on from the professional codes of conduct guiding ethical behavior in this field (Provide the name of the organization, and the code of conduct that pertains to why you act, and then provide the URL for your source)?

5.         Based on your chosen code of conduct principle(s), what would you do (step-by-step) in order to act in accordance with your chosen principle to address this situation?

Answer 1

Ans 1) In the given case the ethical consideration is related to discounting rate and how the treasurer misuse the policy/ discounting provided by the creditors and purposely issuing cheques on the last day and transfering after 4 days. In this he claims discount as well as uses money without interest for further 4 days.

Ans 2) Every person who is interested in the firm and which contributes somehow to the firm whether directly or indirectly are the stakeholders of the firm. In the given case, creditors are the stakeholders harmed and shareholders are benefited as they are owners and using money free of cost for 4 days.

Ans 3) Tiffany should not continue the practice followed by stores treasurer as this is unethical and could harm the firm's long term success. Tiffany has choice to follow ethics and stop using this unethical practice which can harm long term success.