Marc Jackson Has Recently Been Hired As A Cost Accountant

Marc Jackson Has Recently Been Hired As A Cost Accountant By Offset Pr

Marc Jackson has recently been hired as a cost accountant by Offset Press Company, a privately held company that produces a line of offset printing presses and lithograph machines. During his first few months on the job, Jackson discovered that Offset has been underapplying factory overhead to the Work-in-Process Inventory account, while overstating expenses through the General and Administrative Expense account. This practice has been going on since the start of the company, which is in its sixth year of operation. The effect in each year has been favorable, having a material impact on the company’s tax position. No internal audit function exists at Offset, and the external auditors have not yet discovered the underapplied factory overhead.

Prior to the sixth-year audit, Jackson had pointed out the practice and its effect to Mary Brown, the corporate controller, and had asked her to let him make the necessary adjustments. Brown directed him not to make the adjustments, but to wait until the external auditors had completed their work and see what they uncovered. The sixth-year audit has now been completed, and the external auditors have once again failed to discover the underapplication of factory overhead. Jackson again asked Brown if he could make the required adjustments and was again told not to make them. Jackson, however, believes that the adjustments should be made and that the external auditors should be informed of the situation.

Since there are no established policies at Offset Press Company for resolving ethical conflicts, Jackson is considering one of the following three alternative courses of action: (1) follow Brown’s directive and do nothing further, (2) attempt to convince Brown to make the proper adjustments and to advise the external auditors of her actions, or (3) tell the Audit Committee of the Board of Directors about the problem and give them the appropriate accounting data.

Paper For Above instruction

The scenario involving Marc Jackson at Offset Press Company presents complex ethical dilemmas rooted in accounting integrity, professional responsibility, and corporate governance. Each potential course of action carries implications for ethical conduct, legal compliance, and the credibility of financial reporting. This paper evaluates the appropriateness of Jackson’s three proposed actions and discusses the necessary steps he should take if his efforts to resolve the issue directly with Mary Brown prove unsuccessful.

Evaluation of the Three Proposed Courses of Action

The first option, to follow Brown’s directive and refrain from making any adjustments, is highly inappropriate from an ethical standpoint. Jackson, as a professional accountant, has a duty to uphold honesty and transparency in financial reporting (AICPA Code of Professional Conduct, 2014). Neglecting to correct the underapplied factory overhead and overstated expenses compromises the integrity of the company’s financial statements and can have legal repercussions, especially considering the material impact these misstatements have on tax positions. Furthermore, it may be viewed as complicity in unethical behavior, which can damage Jackson’s professional reputation and violate professional standards.

The second option, to attempt to persuade Brown to make the proper adjustments and to inform the external auditors, aligns more closely with ethical principles of objectivity, integrity, and professional responsibility (IFAC, 2018). Convincing Brown to correct the misstatements and disclose the oversight supports transparency and ensures that the financial reports accurately reflect the company’s financial position. However, this course presumes that Brown will be receptive and willing to act ethically, which may not always be the case. If Brown remains uncooperative, Jackson faces a moral dilemma about his subsequent actions.

The third option, to report the issue directly to the Audit Committee of the Board of Directors, is generally considered the most ethically appropriate course of action when internal management resists transparency. The Audit Committee has a fiduciary responsibility to oversee financial reporting and ensure compliance with ethical standards (Public Company Accounting Oversight Board, 2012). This step bypasses managerial resistance and involves individuals with the authority to initiate corrective measures, thus aligning with the ethical principles of integrity and professional responsibility. Nonetheless, disclosing such issues must be handled carefully to avoid false allegations or reputational damage; evidence supporting the misstatement should be thoroughly documented.

Recommended Steps if Brown Continues to Resist

If Jackson approaches Brown again with the request to make the necessary adjustments and is unsuccessful, he must consider formal and ethical steps to resolve the situation. The initial step involves documenting all communications and attempts made to persuade Brown, ensuring a clear record of his concerns and efforts (AICPA, 2014). This documentation is critical if the matter escalates and may be necessary to demonstrate that Jackson acted ethically and in good faith.

Next, Jackson should seek advice from a professional ethics body or an independent accounting authority, such as the American Institute of CPAs (AICPA) or equivalent professional organizations, to confirm his obligations and learn about appropriate reporting procedures. Many professional standards advocate for whistleblowing in cases where unethical practices threaten the accuracy of financial statements (ICAEW, 2020).

Following consultation, Jackson should prepare a factual, objective report detailing the nature of the misstatement, its potential impact, and his attempts to address the issue internally. This report should be presented to the Audit Committee or a designated senior authority within the company, emphasizing his intention to maintain ethical standards and protect the company's integrity (SEC, 2019). If the company’s leadership continues to suppress corrective action, Jackson may have to consider external whistleblowing options, which include reporting to regulatory agencies such as the Securities and Exchange Commission or equivalent authorities in privately held companies.

Throughout this process, Jackson must ensure compliance with legal protections for whistleblowers and maintain confidentiality, unless disclosure is mandated by law. Above all, his actions should reflect his commitment to ethical standards and the safeguarding of the company’s transparency and accountability (OECD, 2018).

Conclusion

In summary, the most ethically sound approach for Jackson involves persistent efforts to persuade management to correct the financial misstatements and, if necessary, escalating his concerns to the Audit Committee. Only through transparent and ethical conduct can Jackson uphold his professional integrity while promoting the accuracy of financial reporting and safeguarding stakeholder interests. Ignoring the issue or facilitating unethical practices for convenience or managerial pressure would violate fundamental accounting principles and professional standards, ultimately undermining trust and legal compliance.

References

• American Institute of CPAs. (2014). Code of Professional Conduct. Retrieved from https://www.aicpa.org/research/standards/codeofconduct.html
• International Federation of Accountants (IFAC). (2018). Handbook of the International Code of Ethics for Professional Accountants.
• Public Company Accounting Oversight Board. (2012). Auditing Standard No. 5: An Audit of Internal Control Over Financial Reporting. PCAOB.
• Security and Exchange Commission (SEC). (2019). Securities Whistleblower Incentives and Protection. SEC Rules.
• Organisation for Economic Co-operation and Development (OECD). (2018). Protecting Whistleblowers. OECD Guidelines.
• Institute of Chartered Accountants in England and Wales (ICAEW). (2020). Ethical Decision-Making in Practice.