Pedro Santos is the controller of a corporation whose stock is not listed on a national stock exchange. The company has just received a patent on a product that is expected to yield substantial profits in a year or two. At the moment, however, the company is experiencing financial difficulties; and because of inadequate working capital, it is on the verge of defaulting on a note held by its bank. At the end of the most recent fiscal year, the company's president instructed Santos not to record several invoices as accounts payable. Santos objected since the invoices represented bona fide liabilities. However, the president insisted that the invoices not be recorded until after year-end, at which time it was expected that additional financing could be obtained. After several very strenuous objections - expressed to both the president and other members of senior management-Santos finally complied with the president's instructions. Required: 1. Did Santos act in an ethical manner? Explain fully. 2. If the new product fails to yield substantial profits and the company becomes insolvent, can Santos' actions be justified by the fact that he was following orders from a superior? Explain.

Pedro Santos is the controller of a corporation whose stock is not listed on a national stock exchange. The company has just received a patent on a product that is expected to yield substantial profits in a year or two. At the moment, however, the company is experiencing financial difficulties; and because of inadequate working capital, it is on the verge of defaulting on a note held by its bank. At the end of the most recent fiscal year, the company's president instructed Santos not to record several invoices as accounts payable. Santos objected since the invoices represented bona fide liabilities. However, the president insisted that the invoices not be recorded until after year-end, at which time it was expected that additional financing could be obtained. After several very strenuous objections - expressed to both the president and other members of senior management-Santos finally complied with the president's instructions. Required: 1. Did Santos act in an ethical manner? Explain fully. 2. If the new product fails to yield substantial profits and the company becomes insolvent, can Santos' actions be justified by the fact that he was following orders from a superior? Explain.

Foundations of Business (MindTap Course List)

6th Edition

ISBN:9781337386920

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Chapter16: Mastering Financial Management

Section: Chapter Questions

Problem 3DQ

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