Phil Kart works for Carmel Candy Company. He enters customer orders in the company’s accounting system. The orders are written on prepared forms by the company’s sales representatives (reps). The company employs ten sales reps, who work different territories. The reps are paid on a commission basis for sales made during the preceding month. Sales reports prepared by the accounting department supervisor are used to determine the commissions. Sales reps drop off the forms with the accounting supervisor each week. The supervisor then delivers the forms to Phil. He enters the orders in a computer and prints out a sales report and sales invoices for each customer. These are picked up by the supervisor, who delivers them to payroll and to shipping. The result of entering the orders in the accounting system is to increase accounts receivable and to increase sales revenue.

Phil has discovered an interesting regularity in some of the orders. One of the sales reps always reports abnormally high orders from a particular customer. A few days after the end of each month the rep submits a cancelation form for the customer to eliminate a large portion of the customer’s order. The supervisor directs Phil to record the cancelation by reducing accounts receivable for the customer and recording an increase in an operating expense account. Phil doesn’t know much about accounting. When he asked his supervisor about this procedure, he was told that it was standard for this customer and not to worry about it.

Phil is suspicious, however, and has considered discussing the matter with the vice president of finance. But he is concerned he may simply be making waves that will alienate his supervisor. Phil has sought your advice, as a friend, about this matter.

Required:

Put yourself in Phil Kart’s position. In deciding how to deal with the situation, consider the following questions:

1. What is the ethical issue?

2. What problems do you see in Carmel’s accounting system and what are your options?

3. What are possible recommendations and possible consequences?

4. What should you do?

Required:

Write a 1 -2 page paper (double spaced) that includes an overview of the following:

a) Introduction to the topic of ethics, what ethics is and how it relates to this scenario.

b) Ethical responsibilities in the accounting profession, using supplemental resources, citing the sources you are using and how it may relate to this scenario.

c) Conflict resolution options when an individual is faced with an ethical dilemma.

d) Conclusion to wrap up your thoughts.