Stakeholders and accounting ethics
to issue a press release to bolster his company’s image and maybe even its
stock price which has been gradually falling. As controller, you have been
asked to provide a list of twenty financial ratiosalong with some other
operating statistics relative to singletary industries first quarter financial
and operations. Two days after you provide the ratios and data requested,
Curtis Conway the public relations director of singleatary, asks you to prove
the accuracy of the financial and operating data contained in the press release
written by the president and edited by Curtis. In the news release, the
president highlights the sales increase of 25% over last years first quarter
and the positive change in the current ratio from 1.5:1 last year to 3:1 this
year. He also emphasizes that production was up 50% over the prior year’s first
quarter. You note that the press release contains only positive or improved
ratios and none of the negative or deteriorated ratios. For instance, no
mention is made that the debt to total assets ratio has increased from 35% to
55%, that inventories are up 89%, and that while the current ratio improved,
the acid test ratio fell from 1:1 to .5:1. Nor is there any mention that the
reported profitfro the quarter would have been a loss had not the estimated
lives of singletary’s plant and machinery been increased by 30%.
Instructions:
a. Who are the stakeholders in this situation?
b. Is there anything unethical in President Singletary’s
actions?
c. Should you as the controller remain silent? Does Curtis
have any responsibility?
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