Question

You are happy to be working as a controller in the headquarter for a company, and the owner and President of the company (the “boss”) trusts you enough to handle the business’s banking account, since you did, after all, get an “A” in your Ethics course. One day the boss hands you to a $225.00 receipt for dinner and entertainment from the night before. He explains it is for entertainment of a client – dinner and the lounge at the boss’s country club – and wants you to cut him a check for reimbursement of the full amount of the receipt. Later that day, the boss’s girlfriend stops by to pick up the boss for lunch. While waiting she talks to the receptionist and you clearly overhear the girlfriend say how much she enjoyed last night’s dinner at the country club with the boss. Using what you learned from Chapter 2 (Cognitive Process and ethical decision making in accounting), what would you do, if anything? Explain your thought process.

Answer 1

Cognitive development means thinking procedures which are followed by an individual in arriving at ethical decisions. In the given case, boss asked the controller for the reimbursement of expenses amounting to $225 by handling him the receipt thereof and asked him to charge such expenditure as business expenses, as it is in relation to the dinner with a client whereas in reality, such expenditure was incurred by the boss towards the dinner with his girlfriend. This fact was heard by the controller while girlfriend of the boss was talking to the receptionist about the last night dinner with the boss. Now, being a controller, it is his duty and responsibility to Foster ethical values in the organization and not follow the orders of his boss of issuing reimbursement cheque, rather he should bring this fact to the notice and attention of those charged with governance of the company. The purpose of this act is to ensure that ethical standards are being followed in the company as far as accounting is concerned by not blindly following the orders and instructions of the senior personnel but through assessment of the genuineness and authenticity of the transaction. It requires moral judgement on the part of the controller to decide as to whether it would be right to charge such expenditure as business expenses despite knowing that it was for the personal enjoyment of his boss. After analyzing the answer of this question, the controller will be in a position to solve this ethical dilemma of choosing between following orders of the boss and doing what is ethically right.