Transcript Family Games, Inc. Case 4-4 - Westfield State University

Family Games, Inc.
Case 4-4
By
John Duarte and Justin Bost
Overview
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Introduction
Ethical DecisionMaking Model
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Framing the issue
The facts
Stakeholders
Core values
Operational issues
Accounting issues
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Ethical DecisionMaking Model (cont.)
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Possible Alternatives
Evaluate Alternatives
Ethical analysis
Decision
Questions
Family Games, Inc.
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Helen Strom, controller
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Carl Land, CFO
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Forced into making a decision
Threatens Helen with taking away
reimbursements for child care
CEO aka “The Big Boss”
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Using company funds in Vegas
Step 1: Framing the Issue
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Should Helen perform an unethical act to
maintain reimbursements for much needed
child care services?
Step 2: The Facts
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Usual annual sales of about $50 million
Net loss the last two years due to cost-cutting
measures
CEO has a gambling problem
CEO has borrowed money from company for
personal reasons (sizeable “I Owe U”)
Step 2: The Facts (cont.)
Transaction began 12/30/07 and is expected
to be finished 1/2/08
 CFO tells Strom to record $12 million
revenue in 2007
 Strom refuses to “cook the books”
 CFO leaves Strom with ultimatum approved
by CEO
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Step 3: Stakeholders
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CEO
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CFO
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Following orders from superior
Parties affiliated with the company
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Needs performance bonus
Employees, shareholders, creditors, etc. need reliable
financial information
Helen’s son
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Needs full time care (autism)
Step 4: Core Values
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Trustworthiness
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Honesty
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Knowingly recording a transaction wrong is not
honest
Integrity
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Likelihood of not getting caught
Step 4: Core Values (cont.)
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Trustworthiness (cont.)
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Reliability
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Financial information
Operations of company
Loyalty
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Helen’s son
The company
Herself
Step 4: Core Values (cont.)
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Respect
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Responsibility
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Helen isn’t receiving any
Helen’s son
User’s of financial information
Fairness
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A “no win” situation
Step 4: Core Values (cont.)
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Caring
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CEO and CFO only caring for themselves
Citizenship
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Public trust in financial statements
Code of Ethics
Step 5: Operational Issues
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Inappropriate use of company resources
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Internal controls
Collusion
Abuse of upper level position
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Coercion
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Possibly throughout entire company
Board of directors
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Lack of governance
Step 6: Accounting Issues
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Improper revenue recognition
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Could affect several accounts
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Overstate revenue and AR
Understate inventory
Improper matching
 Manipulating a sales invoice
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