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Response to Decision Case 6-4

Question Description

From the instructor: "The purpose of these Discussion Board Responses is to create dialog that will challenge you to think critically, express your positions, challenge and/or support the position of others, listen to others, and enhance the overall learning experience. You should add to the original discussion by offering new ideas, concerns, strategies, models, or frameworks that agree with or are in contrast to the author’s position. Your Responses need to present a critical analysis of the Posts to demonstrate a graduate-level depth of critical thinking and analysis. Use the material covered in your textbook readings, instructional videos, and other course material to evaluate the information provided and write two graduate-level responses in the DB Response."

Assignment: Respond to the following Discussion Board Post

(The post should be at least 500 words and include 2 or more academic references.)

Using a Bank Reconciliation to Determine Cash Balance

Decision Case 6-4

Inedra M. Hunter-Liggins

California Baptist University

Decision Case 6-4 Summary

Upon completing the monthly bank reconciliation, a supervisor asks the controller to revise a specific reconciling item. A customer’s NSF check for $10,000 was adjusted to reduce Cash and increase Accounts Receivable for the amount of the check. The supervisor advises the controller to remove the adjustment prepared and revise the reconciliation to treat the NSF check as an outstanding check. The supervisor has a personal relationship with the customer and is confident that “they are good for the money” (Porter & Norton, 2018).

Recognize an ethical dilemma: What ethical dilemma(s) do you face?

The controller is placed in a situation where a choice has to be made to either accurately reconcile the books according to GAAP principles or follow the directive of his or her supervisor and knowingly adjust the books incorrectly. (Porter & Norton, 2018).

Analyze the key elements in the situation?

The supervisor’s recommendation will benefit the company and his or her reputation. Changing the NSF adjustment to an outstanding check will increase the amount of cash and cash equivalents on the company books. This could increase the company’s chances of obtaining a loan or securing investors by showing that the company is able to meet its obligations on the Statement of cash flows. This would also positively impact the Balance Sheet.

Shareholders and others who have a vested interest in the company and utilize the company’s financial statements would be harmed if the controller complied with the supervisor's request. They depend upon the accuracy of the financial statements to make decisions (Porter & Norton, 2018).

The adjustment will also assist the supervisor in maintaining a positive relationship with the customer. This would be a benefit for both parties, especially if this is a long-standing customer. By making this request the supervisor is exhibiting a bias towards this specific customer.

Both the supervisor and the controller have a responsibility and obligation to make sure that the information provided is relevant and a faithful representation of the financial status of the company (Porter & Norton, 2018). The controller also has an obligation to follow GAAP guidelines in recognizing a loss and consistency. It is not uncommon for managers of controllers to place pressure on them to misreport (Eskenazi, Hartmann, & Rietdijk, 2016). Regardless of the pressure received by the supervisor, the controller has a responsibility as a representative of Christ to represent and stand up for what is right. In every situation, one should not lie or misrepresent the truth. This is expressed in Leviticus 19:11 (NRSV). It states, “You shall not steal; you shall not deal falsely, and you shall not lie to one another” This means the controller should follow GAAP procedures. It is the controller’s responsibility to ensure the company’s policy procedures, daily activities and tasks are in line with GAAP (Berman & Knight, 2013).

List alternatives and evaluate the impact of each of those affected:

The controller can either choose to comply with the supervisor’s request, refuse to make the requested changes, or suggest that the supervisor obtain a replacement check right away. If the supervisor’s recommendation is followed without a replacement check in hand, users will not have all the relevant information needed to make decisions. The cash and cash equivalents of the company will be increased, showing more cash than what the company has readily available

Select the best alternative

The best course of action is for the controller to meet with the supervisor to discuss the implications of the supervisor’s recommendations. Together they should make an attempt to obtain a replacement check from the customer. Once the replacement check is in hand then the controller could ethically act on the supervisor's recommendation and properly notate the change. If this is not possible, the controller should not follow the recommendations of the supervisor.


Berman, K., & Knight, J. (2013). Financial intelligence: A manager’s guide to knowing what the numbers really mean. Boston: Harvard Business Review Press.

Eskenazi, P. I., Hartmann, F. G. H., & Rietdijk, W. J. R. (2016). Why controllers compromise on their fiduciary duties: EEG evidence on the role of the human mirror neuron system. Accounting, Organizations & Society, 50, 41–50.….

Porter, G. A., & Norton, C. L. (2018). Using financial accounting information: The alternative to debits and credits (10th ed.). Mason, OH: South-Western Cengage.

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