FINANCE

Please read the Ethical Issue in Chapter 7 on page 402.

In your first post please address the following:

1 – Identify two parties other than O’Connor who can be harmed by this theft. In what ways can they be harmed?

2 – Discuss the role accounting plays in this situation.

In your second post comment on one of your classmates posts. For example:

Do you think that your classmate should have included another factor? Why or why not?

Maybe you agree with your classmate, but for another reason that he/she stated. If so, explain.

ETHICAL ISSUE – Mel O’conner owns rental properties in Michigan. Each property has a manager who collects rent, arranges for repairs, and runs advertisements in the local newspaper. The property manager in Lansing has been stealing from the company. To cover the theft, he understates the amount of the outstanding checks on the monthly bank reconciliation. As a result, each monthly bank reconciliation appears to balance. However, the balance sheet reports more cash than O’conner actually has in the bank. O’conner is showing the balance sheet to prospective buyers.

CLASSMATE POSTMel O’Connor, unquestionably, is the main part harmed by this theft, first for placing his confidence in this manager and allowing the same person to collect rent and other cash duties and do bank reconciliations, and second by the erroneous granting he has on his company real profits. Besides O’Connor, other parties harmed are: the prospective buyers because they will assume all debts as a result of the manager’s theft unless they are able to see the misleading on the balance sheet of the company; the manager when the theft is discovered will be losing his job and ending in jail, and might be paying money back; the accountant in charge of Mr. O’Connors company by losing the job and even the license due to the incompetence in discovering the theft or because he/she agreed with it; as well the tenants may also believe that they had paid the rent while the manager has stolen the money for what they can be evicted from housing while they lost their money.

Accounting plays a big role in all companies, small or big; in this situation the accountant should be able to find the erroneous balances when doing bank reconciliations and getting together balance sheets for the company. It should be able to track down all the way to the manager who was stealing and report to his client, O’Connor.

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