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  • Apr 4, 2011, 09:09 AM
    Business Question - Ethical Case study
    I have to answer some questions on this case study; I want to see if I am on the right track. This is the case study: Mike Trenach is the owner and President of Digital Imagery and More ltd. The revenue of the business is about 16 million dollars a year. In the past few years, Mike has spent the following: * swimming pool built at his home: $40 000
    * Renovations to his cottage: $7500
    * Landscaping around his home: $4000
    * Plumbing and air conditioning installed in his
    Home: $6000
    Although each of these expenditures was of a personal nature, trenach requested that invoices for the charges be sent to his company. All the expenditures were recorded in the books of the company in various accounts. Payments were made from company funds.

    1. Identify the ethical issues?

    This is my answer: Mike Trenach is taking money from his company. There is probably a set budget for the expenses account, so when the company has to pay for expenses the business makes there will not be enough money to pay for those expenses. They find other options to pay diving into other areas of the business such as cutting employees pay checks.The business could suffer, even though the company makes 16 million a year. Mike trenach should have consulted or informed someone like the accountant for the business or the person in charge of the expenses account. Eventually, I think it would have been noticed because there was no source documents to prove the expenses were made for the business, so it will probably be blamed on someone else, and that someone could get fired. In the journal entries the deductions for mike's personal purchases should have been posted as Mike Trenach, Drawings. It would decrease his capital (would it?), but at least it's honest.

    So, my question is, what do you think of my answer? Do you think my answer is the ethical issue?

  • Apr 5, 2011, 04:16 PM
    Just Looking

    You are on the right track, but you could address even more issues. You should also address the tax issues involved. Is this a sole proprietorship, partnership, or corporation? If a partnership, he is stealing from his partner. If a corp, look at the issues of "breaking the corporate veil". It would be difficult for the owner to do what he is doing without some employees being aware - what message is he sending?

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