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Identify the issues, define your ethical decision-making model and ethical theory, explain the options and consequences, and pick the solution you would choose, and why, for the following situation:Sa

Identify the issues, define your ethical decision-making model and ethical theory, explain the options and consequences, and pick the solution you would choose, and why, for the following situation:

Sally, controller and CPA, has been working hard to finish the year-end financial statements for HighTech, Inc. HighTech, Inc. provides social media relationships between users by focusing on up-to-the-minute communications on events—kind of like Instagram. This year is a critical year for the firm. The company is expected to make a profit after five years of product development and losses. In working to complete the year-end financials, Sally finds out that the figures are not logical. In fact, it seems that the company has overstated assets and income by $300 million. Based upon the short investigation that she has been able to complete, it seems that both the CEO and CFO have signed and approved some documents that have inflated the numbers. The documents indicate a realization and recording of the social media customer valuation of future sales into the present accounting period. Every social media customer for the firm generates advertising revenue equal to $5.00 per year. The documents indicate that the social media customer revenue for the year was increased to $7.00 per customer. The incremental revenue was booked on December 30. This lead to an increase in revenue of $300 million and accrual Long Term Account Receivable of $300 million.

Sally is pressured by time (a filing deadline is tomorrow, to get the financial information finalized and printed for the shareholders’ meeting) and the following other considerations:

The shareholders have been promised that an Initial Public Offering (IPO) of the company will be done within the next year. The original founders of the firm are looking at the coming year to issue the IPO. Morgan Stanley has been hired to provide the financial advice on the IPO issuance. The benefits to the stockholders are in the millions.Sally is a go-getter; she wants to succeed in the company. She sees herself as a CFO in the future. Sally has been with the company for five years. She was one of the first employees hired. She has had excellent annual performance reviews. Upper management sees Sally as part of the team.

Sally is a CPA. She has joined the state CPA organization and the AICPA organization. She has viewed and passed the AICPA Code of Professional Conduct Certification.

Sally has personal pressures since she recently bought a new $500,000 house using all her savings as a down payment, $100,000. Further, her husband recently has taken an unpaid leave from his job due to a difficult illness and medical bills are mounting. He fell at work and needed serious back surgery. He needs special nursing care during the day. Sally helps at night as much as she can.

The banks have been patient in providing lending during the rough times but will declare the loans in default and demand immediate repayment if the numbers are not near breakeven.

Answer the following questions:

  1. Based on the above given information, what should Sally do?
  2. What might be the duty of professional responsibility as a CPA and member of the AICPA?
  3. What might Sally’s responsibility to herself be to provide the highest work with integrity, honesty, trustworthy, and transparency?
  4. Does Sally have a responsibility to her firm to follow the directions of the president? If yes or no, provide rationale.
  5. What standard of rules might help Sally to complete the assignment?
  6. What might be the consequences if Sally completes the financial statements within the timeframe and breakeven?

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