Read Case 6-3. Is Gene Lumpkin behaving in a professional and ethical manner? Give reasons for your answer.
Case 6-3
Ethics and professional conduct in business
Mitchell Co. is experiencing a decrease in sales and operating income for the fiscal year ending December 31, 20Y1. Gene Lumpkin, controller of Mitchell Co., has suggested that all orders received before the end of the fiscal year be shipped by midnight, December 31, 20Y1, even if the shipping department must work overtime. Since Mitchell Co. ships all merchandise FOB shipping point, it would record all such shipments as sales for the year ending December 31. 20Y1, thereby offsetting some of the decreases in sales and operas mg income.
Discuss whether Gene Lumpkin is behaving in a professional manner.
Submission Instructions:
- Your initial post should be 200-300 words, formatted and cited in current APA style.
- You should respond to at least two of your peers by extending, refuting/correcting, or adding additional nuance to their posts
1st Post
Hi all,
The way I viewed this case study was basically that Gene Lumpkin was trying to end the year with a bang. There was nothing unethical about his decision to try to rush out deliveries before the year ended. Sales would increase both account receivables and sale revenue. In an attempt to help the company’s decrease in sales for the year, he made the executive decision to get deliveries to customers to raise the sales for the year while he had time. If anything, I see this as capitalizing on an opportunity to help the company. If there is time to attempt to improve numbers, it should be taken advantage of. The issue would arise if the. orders were rushed out and done incorrectly. It would refect that numbers were more important than quality. This would be considered unethical behavior. Customers would receive their order faster, but it would be irrelevant if it was not what they were expecting to receive. Mr. Lumpkin behaved in a professional manner in terms of trying to rectify the company’s weakness for the year. In regards to his employees working over time on the last day of the year, he could give them compensation for the hours. All in all, he made the choice anyone in his position should be brave enough to make.
2nd Post
Gene Lumpkin is the controller for Mitchell Co. a company that is experiencing a decrease in sales and operating income for the fiscal year. As the controller Lumpkin is suggesting that they ship all orders received before the end of the fiscal year to hide their decrease in sales. This is wrong for many reasons:
- Since all of these orders were originally scheduled to ship during the next fiscal year, the current fiscal year will take on the sales and push the loss in sales even more for the following fiscal year.
- This will affect the financial statement and give inaccurate information for 2 fiscal years
- This will affect the stock trade. If Mitchell Co. is publicly traded this could lead to investor fraud. Gene Lumpkin himself could use do a “pump and dump” by owning stock in the company and dumping it in the current fiscal year before the company starts taking on a loss opening them up for stock market fruad.
Overall, the actions of Gene Lumpkin are not professional and not ethical. All of the financial statements from this point forward are incorrect thus overestimating the value of the company. His actions could lead to large amounts of fraud.