In November, Stan Richart, the vice-president in charge of the Smartphone Technologies Division, saw that making the current year’s target profit for his division was going to be very difficult. Among other actions, he directed that discretionary expenditures be delayed until the beginning of the new year. On December 30, he was angered to discover that a warehouse clerk had ordered $350,000 of smartphone parts earlier in December, even though the parts weren’t really needed by the assembly department until January or February. Contrary to common accounting practice, the General Electronics Inc. Accounting Policy Manual states that such parts are to be recorded as an expense when delivered. To avoid recording the expense, Richart asked that the order be cancelled, but the Purchasing Department reported that the parts had already been delivered and the supplier would not accept returns. Since the bill had not yet been paid, Richart asked the Accounting Department to correct the clerk’s mistake by delaying recognition of the delivery until the bill is paid in January.
Required:
Are Richart’s actions ethical? Explain why they are or are not ethical.
Do the general management philosophy and accounting policies at General Electronics encourage or discourage ethical behaviour? Explain.
Sample Solution
