Question

Becky Knauer recently resigned from her position as controller for Shamalay Automotive, a small, struggling foreign car dealer in Upper Saddle River, New Jersey. Becky has just started a new job as controller for Mueller Imports, a much larger dealer for the same car manufacturer. Demand for this particular make of car is exploding, and the manufacturer cannot produce enough to satisfy demand. The manufacturer’s regional sales managers are each given a certain number of cars. Each sales manager then decides how to divide the cars among the independently owned dealerships in the region. Because of high demand for these cars, dealerships all want to receive as many cars as they can from the regional sales manager.

Becky’s former employer, Shamalay Automotive, receives only about 25 cars each month. Consequently, Shamalay is not very profitable.

Becky is surprised to learn that her new employer, Mueller Imports, receives more than 200 cars each month. Becky soon gets another surprise. Every couple of months, a local jeweler bills the dealer $5,000 for “miscellaneous services.” Franz Mueller, the owner of the dealership, personally approves payment of these invoices, noting that each invoice is a “selling expense.” From casual conversations with a salesperson, Becky learns that Mueller frequently gives Rolex watches to the manufacturer’s regional sales manager and other sales executives. Before talking to anyone about this, Becky decides to work through her ethical dilemma. Put yourself in Becky’s place.

Requirements

1. What is the ethical issue?

2. What are your options?

3. What are the possible consequences?

4. What should you do?

Short answer

Ethical issue is about the owner’s gift to regional managers. Option includes do nothing, discuss the matter with the owner, resign, inform the manufacturer. These options will have various consequences. Accountants should never get involved in such type of activities.

Step-by-step solution

Step-by-Step -SolutionStep 1: Ethical Issue

The major ethical issue is deciding what to do about the owner’s gifts to the regional sales managers. Small gifts are justifiable but the goods of high value given to the sales managers and sales executives will considered as bribing.

Options

The options include:

1. Do Nothing
2. Discuss the matter with the owner
3. Resign if the owner will not stop the practice
4. Inform the manufactured

Consequences

The consequences are as follows:

1. If Becky does nothing, then her job and job of other employees will remain secure but if this becomes public then as the controller in the company she will be held accountable. A lawsuit can be brought by other dealers.
2. If the she discuss this with the owner then she might find out about the another angle of the story, and there might no ethical dilemma in this situation.
3. If Becky resigns from the job, then she’ll lose the job but will protect her integrity.
4. If Becky tells about the bribery to the manufacture, then she will lose the job as she will be fired by the owner of the company.

Accountants Should do

Accountants should never become party to an unethical situation like this. Beckey should discuss her concerns with the owner of the company. Becky should also inform manufacturer or she should resign.