Family Games, Inc.
Case 4-4
By
John Duarte and Justin Bost
Overview


Introduction
Ethical DecisionMaking Model
•
•
•
•
•
•
Framing the issue
The facts
Stakeholders
Core values
Operational issues
Accounting issues

Ethical DecisionMaking Model (cont.)
•
•
•
•

Possible Alternatives
Evaluate Alternatives
Ethical analysis
Decision
Questions
Family Games, Inc.

Helen Strom, controller
–

Carl Land, CFO
–

Forced into making a decision
Threatens Helen with taking away
reimbursements for child care
CEO aka “The Big Boss”
–
Using company funds in Vegas
Step 1: Framing the Issue

Should Helen perform an unethical act to
maintain reimbursements for much needed
child care services?
Step 2: The Facts




Usual annual sales of about $50 million
Net loss the last two years due to cost-cutting
measures
CEO has a gambling problem
CEO has borrowed money from company for
personal reasons (sizeable “I Owe U”)
Step 2: The Facts (cont.)
Transaction began 12/30/07 and is expected
to be finished 1/2/08
 CFO tells Strom to record $12 million
revenue in 2007
 Strom refuses to “cook the books”
 CFO leaves Strom with ultimatum approved
by CEO

Step 3: Stakeholders

CEO
–

CFO
–

Following orders from superior
Parties affiliated with the company
–

Needs performance bonus
Employees, shareholders, creditors, etc. need reliable
financial information
Helen’s son
–
Needs full time care (autism)
Step 4: Core Values

Trustworthiness
–
Honesty
•
–
Knowingly recording a transaction wrong is not
honest
Integrity
•
Likelihood of not getting caught
Step 4: Core Values (cont.)

Trustworthiness (cont.)
–
Reliability
•
•
–
Financial information
Operations of company
Loyalty
•
•
•
Helen’s son
The company
Herself
Step 4: Core Values (cont.)

Respect
–

Responsibility
–
–

Helen isn’t receiving any
Helen’s son
User’s of financial information
Fairness
–
A “no win” situation
Step 4: Core Values (cont.)

Caring
–

CEO and CFO only caring for themselves
Citizenship
–
–
Public trust in financial statements
Code of Ethics
Step 5: Operational Issues

Inappropriate use of company resources
–
–

Internal controls
Collusion
Abuse of upper level position
–
Coercion
•

Possibly throughout entire company
Board of directors
–
Lack of governance
Step 6: Accounting Issues

Improper revenue recognition
–
Could affect several accounts
•
•
Overstate revenue and AR
Understate inventory
Improper matching
 Manipulating a sales invoice
