Cleveland Custom Cabinets Case Study

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Case Study Examination and Ethical Questions Ethics plays a vital role in developing accurate and high quality financial statements for management, financial institutions, and investors. As management utilizes financial statements to make decisions regarding the operations of the business, it is necessary to review accurate financial statements to make strategic decisions about the future of the organization. Investors and financial institutions require accurate financial statements to make informed decisions upon whether to invest funds into the organization or the wisdom of lending funds to said organization.
In the case of Cleveland Custom Cabinets, James Leroy is the sole owner and is of the opinion that providing inaccurate statements …show more content…

James Leroy, the company’s sole owner is disappointed in the performance of his company as he intended to present the first quarter financial statements to the bank to acquire a $1 million loan to expand the company. Upon review of the statements it is explained by Mr. Leroy’s accountant Marcus Sims that the cost of company overhead doubled compared to the previous year due to a rise in rent, utilities, and repairs and maintenance of machinery causing the unexpected reduction in net profit. Mr. Leroy, despite his understanding of the determination of net profit, is not pleased and instructs Mr. Sims to ‘tweak’ the numbers as he is the sole owner of the company and ‘owns the board of directors’ making the adjustment of the financial statements acceptable in his opinion. Is it acceptable that the numbers be adjusted because Mr. Leroy is the sole owner? No, it is not as Mr. Leroy has the responsibility to the board of directors to provide them with accurate financial statements as the board of directors has invested in this company and have the right to make informed decisions about the future of the company. Said decisions cannot be accurately made when provided with inaccurate financial …show more content…

When presented with a statement “There is a difference between what we have the right to do and what is the right thing to do,” it is a variance of what is legally beholden, and the morality of adhering to ethics by taking the correct path. What we have the right to do is interpreted by what is legally authorized by federal, state, or local government laws. The right thing to do is guided by personal conscience that tells the individual the correct thing to do (Mintz & Morris, 2014). It becomes a personal choice. Beyond rights are ethical obligations, honesty, and truth-telling. Honesty and truth-telling are ethical obligations which are similar yet different. Honesty is a trait or character possessed by an individual. Honesty is the clerk in a shop who inadvertently overcharges a customer and refunds the excess while admitting their error. Truth-telling is an actual act of not fabricating facts, the facts as they exist are told by an individual. Truth-telling is the act of the honest clerk telling the customer of their

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