Ethics and Professional Conduct in Business

Question

Mitchell Co. is experiencing a decrease in sales and operating income for the fiscal year ending December 31, 20Y1. Gene Lumpkin, controller of Mitchell Co., has suggested that all orders received before the end of the fiscal year be shipped by midnight, December 31, 20Y1, even if the shipping department must work overtime. Since Mitchell Co. ships all merchandise FOB shipping point, it would record all such shipments as sales for the year ending December 31, 20Y1, thereby offsetting some of the decreases in sales and operating income.

Do you feel that the controller is behaving in a professional manner? Why? Discuss and support your points.

Answer 1

Hello Amy:

The determinants of professional behavior vary widely based on the business or industry. Following are some of the ways by which business practices are evaluated:

1. Who are the parties within the organization that developed them and have they have been reviewed by/approved by the management/directors of the organization and anyone else who may be impacted by them;
2. Are they consistent with the behaviors of their competitors or other organizations in the same field;
3. Do they vary from the methods/procedures used or reported previously and, if so, have these variations been explained;
4. Could they be considered deceptive or even illegal if questioned by employees, customers, vendors, stockholders, government agencies, suppliers, the general public, etc;
5. Could they serve as the basis for a lawsuit against the directors and officers of the organization for mismanagement depending upon who was impacted by them;
6. Are they regularly reviewed by attorneys, accountants, consultants, government agencies, professional organizations/societies, and others who may be held accountable for or questioned about them;
7. Are they in compliance with Sarbanes-Oxley, Securities & Exchange Commission, Professional Society/Industry Trade Association, Best Practices of the their Industry, etc. or any other organization, person, governmental agency, policing agency, and entity by whom they might be scrutinized; and
8. To what extent have they been evaluated in terms of the impact they will have on the short and long-term viability of the organization, i.e. short term decisions or actions may have a long-term impact on the future health of the organization.

Hope this helps!