Ethical Dilemma

The West Bay Company, owned and operated by Mohammad Salim, manufactures and sells different types of long life dairy products. The company has reported profits in the majority of years since the company's inception in 1972 and is projecting a profit in 2015 of $65000 down from $96000 in 2014.

Near the end of 2015, the company is in the process of applying for a bank loan. The loan proceeds will be used to replace manufacturing equipment necessary to modernize the manufacturing operation. In preparing the financial statements for the year, the chief accountant, Saleh Saeed , mentioned to Mohammad Salim that approximately $40000 of diary inventory near to be expired and should be written off as a loss in 2016. Mohammad is worried that the write-down would lower 2015 income to a level that might cause the bank to refuse the loan. Without the loan, it would be difficult for the company to compete. This could cause decreased future business and employees might have to be laid off. Mohammad is considering waiting until 2016 to write down the inventory. Saleh Saeed is contemplating his responsibilities in this situation?

Required:

Answer the following questions.

1. What ethical issue, if any, underlies the above case?

2. If there is ethical issue, which part will be affected by?

3. What alternatives should be considered?

4. Assess the consequences of the alternatives.

5. What decision would you recommend?