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Ethics Case
Cranor Corporation has sustained a before tax loss of 8.4 million dollars in 2011. They have sustained the loss from a 10 million dollar expense occurring from a product recall. The company controller, Jim Dietz, wants to include the loss as an extraordinary item on the income statement. The Cranor Corporation has been growing consistently over the past decade and now this year will have a loss. The company controller doesn’t want to have a loss on the income statement because it will affect their stock price in the stock market. The problem is product recall is an infrequent event, but it is not an unusual event, so it can’t be classified as an extraordinary item.
The company chief executive officer has been made aware of the loss and the decision that Jim Dietz wants him to make concerning the loss. The chief executive officer must make the decision as to whether to place the loss under the extraordinary item or list it as a loss in net income for the company. The company controller and chief executive officer’s bonuses are tied to the income from the continuing operations, so they want to include it as an extraordinary item because that will increase continuing operations from the prior year and give them a bonus.
The problem with placing this loss as an extraordinary item is that it will be lying to the stakeholders and creditors about a loss sustained. The company employees will benefit from it as well by lying about an increase in continuing operations that they did not actually achieve. This will be falsifying financial information and misleading those in the stock market. It is not acceptable to neither falsify financial information nor mislead stakeholders and creditors, who have interest in the company. The misleading of the stakeholders and stock market would be immoral and show bad values, whereas if they are honest with the stock market

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