James, controller and CPA, has been working hard trying to finish the year-end financial statements for Smithson, Inc. This year is a critical year for the firm. The company is expected to make a profit after six years of product development and losses. In trying to complete the year-end financials, James is finding that the figures are not adding up. In fact, it seems that the company has overstated assets and income by $3 million. Based upon the short investigation that he has been able to complete, it seems that both the CEO and CFO have signed and approved some documents that have inflated the numbers.
James is pressured by time (a filing deadline of tomorrow to get the financial information finalized and printed for the shareholders' meeting) and the following other considerations:
The shareholders have been promised that an IPO of the company will be done within the next year.
The banks have been patient in providing lending during the rough times, but will have to declare the loans in default, and demand immediate repayment, if the numbers are not near break-even.
The majority shareholder is the sister of the founder, who was known as a highly ethical person. (Her share in the company is the basis for her retirement pension providing round-the-clock nursing care.)
James has his own personal pressures since he recently bought a new $800,000 house using all of his savings as a down payment. Further, his wife recently has taken an unpaid leave from their job due to a difficult illness, and medical bills are mounting.
Based on the above given information, what should James do?
Requirements:
Identify the issues and define your ethical decision making model and ethical theory, explain the options and consequences, pick the solution you would choose and why for in the following way?