Essay About Oliver Bloom And Dex Controller Francisca Diaz

Accounting Case Study
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The case study requested for ethical analysis revolves primarily around a work challenge faced by Oliver Bloom, who has just received a promotion to accounting manager at Dex Corporation’s headquarters in Raleigh, NC. Oliver was promoted to this position as part of his participation in the Leadership Development Program that company founder’s Neha Kaur and James Murphy setup for future development leaders and executives to become well acquainted with the challenges and details of Dex international operations. As part of the program, Oliver held various accounting positions at the manufacturing plan in Cork, Ireland, sales office in Buenos Aires, Argentina, manufacturing plant in Dublin, Ireland, and sales office in Sydney, Australia as part of the rotational requirement in the Leadership Development Program. Oliver’s new promotion of accounting manager at Dex headquarters in Raleigh would have him focusing on reports and financial statements for entire Dex Corporation and not the individual location as he did in the Leadership Development program. On Oliver’s first day of his new job he met with his boss the Dex controller Francisca Diaz, who gave Oliver a quick overview of responsibilities that included gathering the quarterly information from each department and subsidiary to consolidate into the overall company’s financial statements and tax filings. Francisca encouraged Oliver to reach out with any questions even when she is on vacation.         A few weeks later, Oliver noticed that the cost on the transfer pricing document for Dublin, Ireland location was 50% lower than the cost listed in his old files when he worked there over a year ago doing analysis. He realized it was for a prior quarter and that things may have changed since he’d been there and didn’t want to bother Francisca as she was away on vacation and would wait until their meeting next week when she’s back, even though she urged Oliver to reach out with any issues. When Oliver met with Francisca once she was back from vacation he spoke his concern over the lower cost in transfer price as he worked closely with management when he was working at the Dublin location and couldn’t get the cost down at that time. Francisca explained that the lower cost was due to tax planning done by her and Jack Chu, the Dex Corporation tax director. Jack informed Francisca that Ireland has a lower corporate income tax rate compared to other countries and to shift costs from Ireland over to other countries to increase profit in Ireland as the expected profit increase from major savings in labor and overhead never panned out since the Ireland factories went live in manufacturing. Prior to shifting costs from Ireland, the actual cost structure was that Dex purchases parts for Cork facility to manufacture circuit boards and processors which are then sold to Dublin where product is finished and then sold to various sales entities including Sydney.  Under this actual cost structure, the majority of profit is in sales office in Sydney, for example, $300 in Sydney for every $50 profit in Cork and every $150 profit in Dublin. Under the transfer price structure where costs are shifted from Ireland the profit for Cork is $150, $250 for Ireland, and only $100 for Sydney now. Francisca explained to Oliver that the costs and profits total were the same just shifted across locations to leverage the lower tax rate in Ireland.  She explained if they didn’t shift costs from Ireland it would affect more than half the profit at being taxed at a higher rate and also informed Oliver this is good for annual bonuses for those at headquarters as its based on after tax profit of the company. She also mentioned he shouldn’t worry about it because Jack and her finalize the tax returns for the entire company and this wouldn’t affect his responsibility of consolidating reports and statements. Oliver dropped the issue with Francisca to not get on her bad side but was still plagued by the issue and wonders what to do and if its his responsibility. He wishes he could talk to someone about this and still has good relationships with accounting professors and friends from school.         The ethical framework that should be applied and adhered to is a duty-based ethical framework. As this is the approach is the obligation to perform such actions while being truthful and containing integrity since there is a legal obligation to report financial statements arcuately and truthfully. The ethical violations in this case study reside with Francisca, Jack, and Oliver as they are all involved at different capacities of tax fraud by shifting the costs under the transfer price structure to other locations when the work is actual completed in Ireland in order to reach a higher profit in Ireland under their lower corporate income tax rate. Even though, the costs and profits total the same when compared to actual structure the reports are still being completed fraudulently and inaccurate as they do not honestly represent at the detailed location level. Another ethical dilemma that would occur is if Oliver speaks to his accounting professors and school friends about this challenge he is facing at work. This would violate confidentially of the company’s financials to those who are not employees, stockholders, or government agencies such as IRS. The other ethical dilemmas faced is they are inaccurately reporting for their own self interest of a high bonus for high company profit after taxes and defrauding shareholders and employees as its inaccurately reporting net income for the company and the locations in Ireland.