1. What is the ethical issue? The ethical issue in this scenario is the fact that Becky’s new employer Mueller Imports is offering gifts or bribes to manufactures in order to receive large quantities of cars a month. However, Becky’s previous employer who is lacking in the amount of cars received each month.

2. What are your options? The options here could be one or two things: First, talk to owner and let him know that this is not the proper way to do business or inform the proper authorities and risk losing job. The other option, turn the other cheek and see this as a way of the business to stay profitable. Even though this seems unethical, this dealership has sold the cars coming in without bribing customers to purchase.

3. What are the possible consequences? The possible consequences in this scenario with Becky, is that the new employer could risk the possibility of some jail time for this kind of dealings. In this case, they could be considered as a bribe to manufactures and not as gifts to show appreciation of business relationship, as the gifts are very lavish.

4. What should you do? If I were in Becky’s place, I would inform the new employer that I now know how this dealership is obtaining more inventory than `others. I would of course, approach the subject very carefully. But I would let them know it is unethical. I would begin looking for new work if the company refused their unethical business practices. Once I found a new job I would then inform Franz that I can no longer work for such a business that commits fraud or give brides to ensure more inventory than competitors.

?Post 2

Becky Knauer is controller for Mueller Imports. She has learned that the owner of Mueller Imports has been purchasing Rolex watches (valued $5,000.00 ea.) and giving them to the car manufacturer’s regional sales manager and other sales executives. He also is noting on each invoice that these are “selling expenses”.

Everyone has their own moral compass, and each of us have different values. I will not waste any time arguing if this is morally wrong, that is for each of you to decide for yourself. I will however address the legal issues Becky is faced in our example.

Mueller Imports is currently receiving 200 new cars to see monthly. Assuming he sells the cars for $35,000.00 ea. he would show $7,000,000.00 per month in income. This is not a small company and therefore may have investors and/or creditors that are entitled to receive financial statements. If this is a publically traded company the SEC (Securities Exchange Commission) requires that the financial records be audited by an independent auditor. The independent accountant would then issue an opinion that states whether or not the financial reports give a fair picture of the company’s financial situation. A good accountant would question the jewelry receipts marked “selling expenses” as this is not a valid expense for the nature of this business. In fact, this would be considered a bribe.

In addition the Sarbanes-Oxley Act (SOX) requires companies to take responsibility for the accuracy and completeness of their financial statements. The SOX encourages employees to report corporate fraud. These employees are known as whistleblowers and are protected from retaliation under the U.S. Department of Labor. SOX also allows for criminally charges to be brought against the offenders by the Department of Justice.

I would recommend Becky report this activity under the whistleblower protection and seek employment from another company.

Horngren’s Accounting Tenth Edition