Sabra Surkis, president of Surkis Industries, wants to issue a press release to improve her company's image and boost its share price, which has been gradually falling. As controller, you have been asked to provide a list of financial ratios along with some other operating statistics from Surkis Industries' first-quarter operations for the current year.
Two days after you provide the ratios and data requested, Carol Dunn, the public relations director of Surkis, asks you to review the financial and operating data contained in the press release written by the president and edited by Carol. In the news release, the president highlights the sales increase of 5.2% over last year's first quarter and the positive change in the current ratio from 1.1:1 last year to 1.5:1 this year. She also emphasizes that production was up 10.1% over the prior year's first quarter.
You note that the release contains only positive or improved ratios, and none of the negative or weakened ratios. For instance, there is no mention that the debt to total assets ratio has increased from 35.1% to 44.9%. Nor is it mentioned that the operating cycle has increased by 19%. There is also no indication that the reported profit for the quarter would have been a loss if the estimated lives of Surkis's machinery had not been increased by 20%.
Instructions
(a) Who are the stakeholders in this situation?
(b) Is there anything unethical in president Surkis's actions?
(c) Should you as controller remain silent? Does Carol have any responsibility?