Question

"Ebenezer Manufacturing Company allows employees to purchase, at cost, manufacturing materials, such as metal and lumber, for personal use. To purchase materials for personal use, an employee must complete a materials requisition form, which must then be approved by the employee's immediate supervisor. Beth Turner, an assistant cost accountant, charges the employee an amount based on the company's net purchase cost. Beth wants to replace a deck on her home and has requisitioned lumber for personal use, which has been approved in accordance with company policy. In computing the cost of the lumber, she reviewed all of the purchase invoices for the past year. She then used the lowest price to compute the amount she would pay the company for the lumber."

Required:
Discuss whether Beth behaved in an ethical manner. Include internal control issues in your comments.

Answer 1

Ebenezer Manufacturing Company

Beth Turner did not behave in an ethical manner by choosing the lowest price to compute the amount she would pay the company for the lumber she requisitioned. She should have used a similar rate that she had been using for other staff members. She should treat herself as she treats others, because what is good for the goose, is also good for the gander.

Moreover, she breached internal control regulations which would have ensured that she was not the same person initiating a transaction and charging the rate in the accounting system. If, she must do the charging, at least, she should have recorded it at a fair price, which must be similar to the rate she was using for others. It also seemed that she was not being supervised by the Cost Accountant, who was supposed to authorize the charging.

Step-by-step explanation:

Internal controls are checks instituted by management to ensure that the assets of the entity are safeguarded, that financial reports are timely and accurately done, and that the goals of the business are achieved.

Some of the key internal issues being breached in this situation include, oversight and self-review, control with authorization of transactions, and separation of functions.