- 28 Sep, 2020
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Ethics Case
Falk Fabrics Company is a privately-held company with customers across the U.S. The company
manufactures of a variety of retail apparel, some are custom pieces others are traditional “offthe-rack” products. The company employs 52 people primarily from the neighboring community.
Requests/inquiries for products are initially received online via an automated system. Each
product inquiry is then submitted to a hopper, where sales staff are required to follow-up in an
attempt to transform the request from an inquiry to a committed contract. The sales staff are paid
on commission, based on volume and the revenue generated from the committed contract.
Margaret has just been hired as the Payroll Manager. She was welcomed to her new position by
the General Manager, Allen (her immediate supervisor) and David, the company owner.
Margaret’s first impression of the company is that it is a welcoming environment with
professional people who are friendly. David told her to see him if she has any questions or
problems.
Allen, the General Manager who hired Margaret, informed her of the need for maintaining strict
confidentiality regarding employee salaries, pay scales and commissions. The previous Payroll
Manager was terminated after disclosing certain payroll information which violated the
confidentiality guidelines.
After three months of employment, Margaret began to wonder why one salesperson (Mark) made
so much more in commissions than the other salespeople. She assumed that Mark was highly
experienced, exceptionally charismatic and persistent. She overheard David commending Mark
on his performance on several occasions. She noticed that David, Allen, and Mark often have
lunch together.
In the sales department, inquiries for fabric orders are randomly assigned to salespeople.
Company policies do not permit salespeople to select specific inquiries. When a salesperson has
responded to a product inquiry, they are assigned to the next inquiry in the hopper. As the
Payroll Manager, Margaret is responsible for preparing a quarterly reconciliation of the number
of inquiries with the number of completed contacts by the sales staff. When the reconciliation is
completed, she must submit the reconciliation to Allen.
The quarterly report is summarized by month, with a total for the quarter. While preparing the
reconciliation report, Margaret notices a discrepancy for the first month’s inquiries. The total
number of inquiries logged in by their automated system (165) was less than the total of all
inquiries that the salespeople reported (210). Salespeople should not respond to inquiries outside
of the company’s system. Casual inquiries resulting from conversations with potential customers
are also logged into the system. Thus, all inquiries are logged in through the system. She speaks
to Allen about the discrepancy. He tells her to just finish the other two months and they can chat
about it once the report is complete. As Margaret returns to Allen’s office with the completed
report, she hears Allen telling Mark, “Yes, I will still send the easy inquiries directly to you”.
Now, Margaret understands why Mark’s commissions are so high and the why the reconciliation
report does not match. Allen is bypassing the system and diverting inquiries with assured
commitments to Mark. After some investigation, Margaret discovers that Mark is Allen’s
brother.
Margaret is contemplating what to do. She has only been at the company a short time and is still
on probation. This is her first job since college.
REQUIRED:
This is an individual assignment.
Discuss the ethical implications and demonstrate your decision-making processes for the above
scenario. Below are questions that may help guide your discussion. The questions are a guide (a
sentence or two answering each question is insufficient). You should provide a well-organized
thoughtful discussion of the ethical situation and the business/organizational problem that the
company faces. NOTE: The following questions are not in any particular order. ORGANIZE
your discussion in a logical manner.
• What ethical dilemma does the accountant face?
What business problem(s) does the company have?
• Who are the potential stakeholders and how might they be affected by the decision of the
accountant?
• What choices does the accountant have? Evaluate the choices, i.e. who benefits or who is
hurt by the choice(s).
• What action would you recommend, i.e. how do you believe the business problem should
be resolved? How should the ethical dilemma be resolved?
• Going forward, what should the company do regarding organizational ethics?