Ethics and Professional Conduct in Business
Bud Wyckoff should advise Ellen Knutson against expensing advance payments against the February budget. Notably, this is so because it is not a good budgeting practice to expense payments or costs against a budget that is not related to them (Morales Burgos et al., 2020). One primary reason for budget preparation is to monitor expenditures and ensure that they fall within the expected projections. The fact that an advertising campaign was delayed and its costs likely to be incurred in May should not be a basis for switching the costs with those of February. Instead, Ellen Knutson should explain the significant variance that is expected to be reported in February using the postponed marketing campaign since it is a valid reason. Similarly, Ellen Knutson should note the response from Bud Wyckoff that budget targets for a specific period should not be met with exactness, and variances are always expected. The important part should be explaining and justifying sufficiently the rationale behind the variances.
The move to prepay convention-related expenses in February can only be good if the company is anticipating difficulties in future cash flows. However, it should not be based on the marketing director’s decision. Major shifts in budget provisions require top management approval (Endenich & Trapp, 2020). Essentially, Ellen’s idea is not a good, cautious move regarding cashflow management since the advertising campaign expenses that had been budgeted for February had their allocation. The allocation can be pushed to May after the management discusses the issue. The decision to pay many expenses is seen to be in Ellen’s self-interest to avoid explaining to the upper management the huge budget estimations that are to be incurred in May. Thus, this should not be viewed as a good move by the company’s upper management.
References
Endenich, C., & Trapp, R. (2020). Ethical implications of management accounting and control: A systematic review of the contributions from the Journal of Business Ethics. Journal of Business Ethics, 163, 309-328.
Morales Burgos, J. A., Kittler, M., & Walsh, M. (2020). Bounded rationality, capital budgeting decisions, and small business. Qualitative Research in Accounting & Management, 17(2), 293-318.
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Question 
Case 11-1
Ethics and professional conduct in business
Instructions:
State a definitive answer to the case question posed at the end of the narrative, “How should Bud Wyckoff respond to Ellen Knutson’s request to expense the advance payments for convention-related costs against February’s budget?”
Ethics and Professional Conduct in Business
Discuss in your answer the appropriateness of Ellen (Marketing Director) prepaying the convention-related expenses in February, when the convention will take place in May. Is this a good cautious move for the company and its cash flow? Is the Marketing Director’s motivation for paying these expenses early for the company’s benefit or her self-interest? Should this be viewed as a favorable move by the company’s upper management?
To receive full credit for your answer, in instruction 1 above, you must explain your reasoning. If you believe “Yes,” that Ellen should be allowed to expense the advance payments in February, you must say why you think it is OK. If you believe “No,” that Ellen should not be allowed to expense the advance payments in February, you must say why you think this is inappropriate.
4.. Format Instructions: The assignment should be typed, double-spaced 12″ font in a Word document and be at least 1 page in length. Any information research that you use for the assignment should have the proper citation. The Safe Assign likeness percentage should not be more than 40%. Do not include/copy the case question in your assignment submission.
5.. Before you upload your paper to the “Final” Professional Writing Assignment drop box, you must upload your paper to the “Draft” Professional Writing Assignment drop box to check that your Safe Assign similarity % is less than the maximum allowed of 40%. If your likeness % is not less than the maximum allowed, you will lose 40 points from your grade.
****Enclosed is the CASE 11-1:
Case 11-1
Ethics and Professional Conduct in Business
The director of marketing for Truss Industries Inc., Ellen Knutson, had the following discussion with the company controller, Bud Wyckoff, on February 26 of the current year:
Ellen: Bud, it looks like I’m going to spend much less than indicated on my February budget.
Bud: I’m glad to hear it.
Ellen: Well, I’m not so sure it’s good news. I’m concerned that the president will see that I’m under budget and reduce my budget in the future. The only reason that I look good is that we’ve delayed an advertising campaign. Once the campaign hits in May, I’m sure my actual expenditures will go up. You see, we are also having our sales convention in May. Having the advertising campaign and the convention at the same time is going to kill my May numbers.
Bud: I don’t think that’s anything to worry about. We all expect some variation in actual spending month to month. What’s really important is staying within the budgeted targets for the year. Does that look as if it’s going to be a problem?
Ellen: I don’t think so, but just the same, I’d like to be on the safe side.
Bud: What do you mean?
Ellen: Well, this is what I’d like to do. I want to pay the convention-related costs in advance this month. I’ll pay the hotel for room and convention space and purchase the airline tickets in advance. In this way, I can charge all these expenditures to February’s budget. This would cause my actual expenses to come close to the budget for February. Moreover, when the big advertising campaign hits in May, I won’t have to worry about expenditures for the convention on my May budget as well. The convention costs will already be paid. Thus, my May expenses should be pretty close to the budget.
Bud: I can’t tell you when to make your convention purchases, but I’m not too sure that it should be expensed on February’s budget.
Ellen: What’s the problem? It looks like “no harm, no foul” to me. I can’t see that there’s anything wrong with this—it’s just smart management.
1. How should Bud Wyckoff respond to Ellen Knutson’s request to expense the advanced payments for convention-related costs against February’s budget?