Susan Applies for a Loan Susan Spiffy, owner of Spiffy Cleaners, a drive-through dry cleaners,…

Susan Applies for a Loan

Susan Spiffy, owner of Spiffy Cleaners, a drive-through dry cleaners, would like to expand her

business from its current location to a chain of cleaners. Revenues at the one location have been

increasing an average of 8% each quarter. Profits have been increasing accordingly. Susan is conservative in spending and is a very hard worker. She has an appointment with a banker to apply

for a loan to expand the business. To prepare for the appointment, she instructs you, as chief

financial officer and payroll clerk, to copy the quarterly income statements for the past two

years but not to include a balance sheet. Susan already has a substantial loan from another bank.

In fact, she has very little of her own money invested in the business.

Required

Before answering the following questions, you may want to refer to Exhibit 1-13 and the

related text on pages 27–29. Support each answer with your reasoning.

1. What is the ethical dilemma in this case? Who would be affected and how would they be

affected if you follow Susan’s instructions? (Would they benefit? Would they be harmed?)

What responsibility do you have in this situation?

2. If the banker does not receive the balance sheet, will he have all of the relevant and reliable

information needed for his decision-making process? Why or why not? Will the information

provided by Susan be free from bias?

3. What should you do? Might anyone be harmed by Susan’s accounting decision? Explain.