Please reply of at least 150 words on this discussion and support the assertions with at least two scholarly citations in current APA edition format which must have been published within the last five years.
Justification for what Charles did.
According to the case, Charles graduated from a prestigious university and had spent five years of normal progress working with an accounting firm. This piece of background information on Charles makes him an auditor with five years of experience and having graduated from a prestigious business school which implies that Charles was very familiar with ethical and unethical behavior and the concepts of fraud, fraudulent activity, and its implications. Not having this information, I would still have a hard time justifying what Charles did; however, taking this information into account, I cannot even contemplate justifying his behavior.
Charles was a controller with four years of experience as an assistant controller for the same company and prior to that, five years of experience in an accounting firm. This is hardly the case of a fresh out of college accountant with limited exposure to the work environment. Charles knew or should have known how to make decisions observing ethical and legal issues and should have known also how to navigate conflicts and withstand pressure when it came to financial reporting.
When Charles assumed the role of CFO he should have brought with him the perspective of not only being responsible for the company’s financial reporting but also he should have assumed a fiduciary role for the investors when it came to ensuring accuracy of financial reporting. When referring to the role of CFOs, Caglio et al. (2018) stated “they are expected to be the gatekeepers or watchdogs of financial information accuracy.” (p. 266).
What Charles could have done to avoid the ethical dilemma that he faced.
When reading the case we see that when the CFO abruptly resigns and briefly speaks to Charles about the resignation. During that conversation, the CFO hints at issues that he strongly disagrees with as being the cause of his resignation; The CFO then offers Charles his contact information and tells him to contact him if Charles needs help or has questions. Charles should have taken that opportunity to find out as much as he could about the circumstances that led to the CFO’s behavior so he could prepare for potentially facing similar issues.
Also, Charles should have consulted with an attorney to see what his legal options were after the CFO pressured him to improve the sales numbers. Charles should have explored his legal options and then clarify his ethical point of view when he was asked to find a way to make the numbers better. From a Christian perspective, Charles should have had the courage to carry out his watchdog fiduciary duties and resist the pressure to inflate the sales figures; as we are taught in the scriptures, “Blessed are those who act justly, who always do what is right.” (Psalm 106:3, NIV).
Securities and Exchange Commission potential role in investigating this fraud.
As described by Solomon & Soltes (2021) “SEC enforcement investigations focus on deceptive conduct, including delinquent filings, insider trading, market manipulations, and financial fraud related to disclosure of issuers.” (p. 293). Without a doubt both Charles and his boss would get in legal trouble had the Securities and Exchange Commission (SEC) learned that Charles and his boss knowingly included and reported figures in their financials that they knew were not accurate for the purpose of making the financials look better than what they were.