Unformatted text preview: MINICASE: ACCT - 01
BUSINESS ETHICS PROGRAM
Rusty and Dusty Slow Movers
Characters: Ron, Inventory Control Clerk
Art, Company President
Rhonda, Sales Manager
Penny is the first Controller ever hired at a medium-sized farm machinery company. The
firm has reacquired tractors and other parts and equipment from farmers who filed for
bankruptcy or were seriously behind in their monthly payments during a recent two-year
downturn in the economy. In addition, the firm has acquired some miscellaneous
inventory from competitors experiencing the same misfortune.
One of Pennys initial goals is to determine how accurately the inventory on the books
reflects its fair market value. As she walks with Ron, the inventory control clerk, through
all the equipment and inventory pallets, she notices that numerous parts and machines
look rusty and dusty. Ron informs her that while only about a third of these items are
repossessions, most are from overruns or the recession; many have been sitting on these
skids for years. As Penny inquires further, it appears that this problem is extensive, and
that this inventory moves slowly. When the inventory does sell, it is at a significant
discount. Rhonda, the Sales Manager, indicates that these are really tough times to sell
this stuff, especially because most of the slow movers are large-ticket items. In fact,
Rhonda feels sorry for her sales staff since they have been forced by the company
president to push these items with only 2 percent more in commission.
Finally, Penny approaches Art, the Company President, about this problem and asks what
he intends for her to do about the dilemma. Art informs her that he believes that many of
these items are salable given appropriate marketing and the right economic conditions.
Besides, some of his major customers owe him a few favors. Art also indicates that now
is not the right time for the company to take a hit from inventory revaluation.
During the ensuing months, Penny did not see much movement from these stacks. She
again approached Art and asked how he would address this issue when the audit came. Art
reiterated his former response regarding product salability and stressed actual sales across
all product lines to the auditors. He asked Penny not to point out this problem to the
auditors and finally said, just se...