Facts of the case
WorldCom had neglected the ethical programs in the company saying that it was a waste of time. The ethical program should have saved the mid-level accountants jobs and they would never have served time in jail. Ethic programs are policies set to promote ethical conduct and abiding by the law. Business ethics touches on all aspects of the business. The aspects include human resource, communication, marketing and operation. The business ethics programs is used to create awareness of any ethic issues, reduce misconduct and improve decision making process (Bebbington et al, 2008).
In WorldCom the organization lacked a ethical program which could have help the accountant in this case. The company was shut due to the misuse of funds and covering up the process. The process involved three senior members of the company and two mid-level accountants. The company was using so much of their revenue in high rental costs of equipment and infrastructure. The telephone infrastructure which used most of the income include the poles, wires and also the maintenance cost of the equipments.This high cost of the line rental cost reduced earning of the company and increased the cost of future capital raising. The high cost was covered up by the chief financial officer and the financial controller who found out the company was spending so much on the cost of materials and maintenance cost. If the company was using the business ethics much of this would have been avoided.
The Financial controller David discovered the problem and reported to his boss the Chief Financial Officer (CFO) Scott Sullivan. Scott saw that it cost them so much coming out clean so they decided to cover the financial statement which the stakeholders receive .The two thought it was an error and that it would be corrected on their next financial year. Scott Sullivan failed to follow business ethics of reporting the matter before it was too late.so much could have been done to reduce the cost of maintenance of renting the equipment. Scott instructed David to adjust the company financial statement by reducing the line-cost expense so that the company could meet the normal revenue. David who was loyal to his boss did not think it was the best thing to do but at that moment he felt that it would be temporary .Using the business ethics David would have reported the matter despite the instructions of his boss. David also thought it was an error in the system (Chapman et al, 2007).
Ethical issues in the case
David had to involve mid-level accountants to change the financial statement of the company, since they could not change the financial statements themselves. David consulted his colleague Buford, an accounting director at the firm about the issue which he had no choice but to help David, Buford had two involve two of his accountants Betty and troy who would give them advise on which specific accounts to change. The accountant who were not comfortable with the situation had to physically change the financial statement themselves since it entry of the financial statements was one of their duties. The accountants made adjustment which involved hundreds of millions of dollars to meet the companies earning expectation. The two accounts change the information with no help in which they I only thought the problem was temporary. The pressure was there since the deadline of releasing the company’s financial statement to the stakeholders had almost reached. If they had not altered the documents their jobs were at risk hence they had to obey the orders of their bosses.
Ethical programs would have saved the accounts from losing their jobs .The ethical programs in an organization supports decision-making and ethical thinking. If WorldCom still had ethical programs the accounts would have a choice of making their own decision and not taking part in the scheme of covering up the financial statements.
Step 1. Facts of the case
Buddy Yates had discovered that the company was using a lot of capital on Line rental costs such as poles, wires and also the maintenance cost of the equipment. Buddy discovered this when his close friend David the financial Controller in the company seek advice from him about altering the financial statement not to reflect the use of most of the company’s revenue on maintenance cost. The case here is altering the financial statements of the company (Riahi, 2009).
Step 2. Ethical issues in the case
Buddy Yates neglected his duties as an accountant by helping his close friend alter the financial statement of the company. He played along what the chief financial officer had instructed David to do. He instructed two of his accountant to change the company financial statement to the normal rate of which the company was experiencing a loss. As an accountant he was to report the matter and not play part in the altering of the documents for the sake of the stakeholders.
Norms, principles and values related to the case
Step 3. Norms, principles and values related to the case
The norms, principle and the values are assumed that the accountant is a person of integrity and transparency and honesty. They are assumed to provide a true and fair results in any financial matter in the organization. Buddy Yates lacked this principles and norms in this situation by accepting to help his friend despite the plan going against the accountant norms and principles. He was to report the matter when he discovered the anomalies in the financial statements and results. The accountant are entrusted with the company’s financial accounts and should report or follow the correct procedure in case there is a financial situation. Anything that prevents the accountant from reporting is a failure to the accountant objectivity and responsibility to the shareholders (Bebbington et al, 2008).
Step 4. Alternatives courses of the action
The options for Buddy was to either report the anomalies in the financial statements or to proceed with helping his friend by covering the up the loss in the company finances. Taking the first option of reporting the matter to the relevant authorities would have costed him his job but could have saved the company.
Step 5. The best course of action that is consistent with norms, principles, and the values identified
The best course of action which is consistent with the norms, principles and values is to report the anomalies in the financial sector of the company. Buddy could have chosen not to help his friend David and could have saved the jobs of his accountant by reporting the issues to the relevant authorities. Buddy Yates risked the jobs of two of his best accountant by helping David cover up the loss in the financial sector of the company. As a professional accountant Buddy could have sticked to the principles of an account by showing integrity and transparency. He should have reported the matter as soon as he knew the situation. The norms and principles of an accountant is to report accurate information to the shareholders.
Step 6. The consequences of each possible course of action
The option of accepting his friend David and following his boss instruction lead to the fall of the company due to inaccurate report in the financial statement. This led to his collapse of the company and a jail term for all the member involved .The second option was to report the losses in the financial statement and seek other ways of reducing the cost and saving the company. He would have lost his job since he would go against his boss instructions but he would have saved the company and avoided a jail term (Chapman et al, 2007).
Step 7. What is the best ethical decision Buddy could have made
The best decision Buddy could have made was to report the losses in the financial sector and probably save the company. He would have gone against his boss’s decision but it would have been the best decision which could have save the company and avoided a jail term. Buddy could have also saved his accounts jobs and also their jail term. He would have consulted too to get a better idea of how to handle such a situation.
Conclusion
In WorldCom the organization lacked an ethical program which could have help the accountant in this case. The company was shut due to the misuse of funds and covering up the process. This high cost of the line rental cost reduced earning of the company and increased the cost of future capital raising. The high cost was covered up by the chief financial officer and the financial controller who found out the company was spending so much on the cost of materials and maintenance cost .The process involved three senior members of the company and two mid-level accountants. The company was using so much of their revenue in high rental costs of equipment and infrastructure. The telephone infrastructure which used most of the income include the poles, wires and also the maintenance cost of the equipment. If the company was using the business ethics much of this would have been avoided.
References
Bebbington, J., Gray, R., & Laughlin, R. (2008). Financial accounting: Practice and principles. London: Thomson Learning.
Chapman, C. S., Hopwood, A. G., & Shields, M. D. (2007). Handbook of management accounting research. Amsterdam, NL: Elsevier.
Riahi-Belkaoui, A. (2009). Accounting theory. London: Thomson.
Mitra, J. K. (2009). Advanced cost accounting. New Delhi: New Age International (P) Ltd., Publishers.
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