Marvin Silverstein, a trusted employee of Progressive Supply Company, found himself in a difficult financial situation. His

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Marvin Silverstein, a trusted employee of Progressive Supply Company, found himself in a difficult financial situation. His son’s college tuition had to be paid in full by the end of the month. The family had experienced some unexpected expenses and the money was just not there to pay the tuition. Marvin knew his son could not register for classes until the tuition was paid, and classes filled quickly, so this could cause his son not to get the classes that he needed to graduate on time.
Marvin considered himself a “true company man” who never missed work and was always willing to work until the job was finished. Although he had been with the company for 10 years and was entitled to two weeks-vacation per year, Marvin never found time to take vacation.
Because of his loyalty to the company over the years, he knew that his boss would probably loan him the money that he needed for his son’s tuition, but he just couldn’t bring himself to ask his boss for a loan. As Marvin thought about the situation, he realized how simple it would be for him to “borrow” some money from the company to help him through these rough times and pay it back before anyone noticed.
Marvin was responsible for all of the bookkeeping functions, plus opening the mail, counting the cash in the registers at the end of the day, and making the daily bank deposit. With these combined duties, Marvin found it fairly simple to give himself a “loan.” He removed $2,500 in cash from the cash register and replaced it with a $2,500 check from the incoming mail that day.
The check was from a customer who was paying his or her account in full. Marvin made a journal entry crediting Accounts Receivable to clear the customer’s account, but rather than debiting Cash, he debited Inventory. Marvin knew that inventory was not counted and reconciled until year-end. This would give Marvin plenty of time to get the “loan” repaid before anyone noticed.

Requirements
1. What are the ethical considerations in this case?
2. Discuss the primary internal control weakness in this case that could have contributed to Marvin’s actions.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
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Financial Accounting

ISBN: 978-0133052152

2nd edition

Authors: Robert Kemp, Jeffrey Waybright

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