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The Anonymous Caller: Recognizing It’s a Fraud and Evaluating What to Do

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The Anonymous Caller: Recognizing It’s a Fraud and Evaluating What to Do
The ethic case study was about an anonymous caller who is the controller of a privately-held, small, start-up company. The company was experiencing a severe cash shortage and was required to present the quarterly financial statements to the local bank, in order to begin receiving funds for the line of credit again. She had concerns that the senior executives of the company provided the local bank with misstated financial statements. The caller was later informed that the accounts payable clerk was instructed to record sales transaction generated by the Chief Executive Officer (CEO) of the company. As a result, the sales and receivables accounts were overstated in the financial statements. Before returning to work Monday morning, the caller decided to contact her former accounting professor, Dr. Mitchell seeking advice on how she could possibly handle the situation.
After listening to the anonymous caller’s situation, if I were Dr. Mitchell, I would first advise the caller to conduct a meeting with the senior executives of the company, in order to explain her concerns in reference to the submission of quarterly financial statements to the bank that overstated the sales and receivables account. Also, I would advise the caller to reiterate the consequences to the senior executives during their meeting, warning them of what could happen if their illegal procedures were noticed; such as pay a large fine or serve jail time. However, after having the meeting if the senior executives seems not to care or take action to correct the problem; I would then advise the caller to secretly collect information that could prove her company’s illegal practices according to the General Accepted Accounting Principles (GAAP), such as the company’s journal ledger and relevant financial statements in order to...

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