Reference no: EM132648153

You have been recently hired as an assistant controller for XYZ Industries, a large, publically held manufacturing company. Your immediate supervisor is the controller who also reports directly to the VP of Finance. The controller has assigned you the task of preparing the year-end adjusting entries. In the receivables area, you have prepared an aging accounts receivable and have applied historical percentages to the balances of each of the age categories. The analysis indicates that an appropriate estimated balance for the allowance for uncollectible accounts is $180,000. The existing balance in the allowance account prior to any adjusting entry is a $20,000 credit balance.

After showing your analysis to the controller, he tells you to change the aging category of a large account from over 120 days to current status and new invoice to the customer with a revised date that agrees with the new category. This will change the required allowance for uncollectible accounts from $180,000 to $135,000. Tactfully, you ask the controller for an explanation for the change and he tells you "We need the extra income, the bottom line is too low."

Problem 1: What are the potential consequences if you do comply with your supervisor's instructions? Who will be negatively impacted?

For this question, you want to name potential individuals who may be negatively impacted if the assistant controller does follow the instructions of his supervisor and how they may be affected. Again, think about the stakeholders you identified in question. For example, how would this affect the company's reputation? Are there other potential ethical and/or criminal violations?