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Carley just received her CPA designation and is very excited to have been hired as a controller by Canada Medical Supplies Inc. (CMS). On their last financial statements CMS showed a net worth of $6,000,000. Carley's job is to oversee the daily accounting and finance activities. CMS has a December 31st year end and reports according to ASPE. Carley was hired to replace Marty Brown who had to leave his job due to medical reasons. He had been ill for quite some time before he finally went on long term disability. He will not be returning to the company. Carley reports to Christina Smith who is the CEO of the company and the major shareholder. There are six other shareholders but Christina owns 75% of the voting shares. Carley is finding her new role very challenging because MMS's books are such a mess. Their inventory records are inaccurate or missing and most of the accounts receivables are overdue by 45 days. Managing the cash flow has also been challenging. CMS has recently had to rely heavily on their $600,000 line of to meet operating costs because of an overall decline in industry sales. As a result, CMS laid off their highest paid salespeople in order to cut costs. The bank is aware of the decline in industry sales and is pushing Carley for more information about the company's current financial situation. Carley is pretty worried about the cash situation because CMS will be in big trouble if the bank decides to reduce or call in the line of credit. Christina has ordered Carley to hold out mailing many of the large vendor cheques because she doesn't want to the bank to catch on to how bad their current financial situation is. Christina will also not allow Carley to remit the HST that the company collects on sales until after the cash is received from their customers. Christina believes this will help their cash flow because they will have the cash on hand to pay the HST. 

Required:

 

1. Identify the relevant facts in this case.
2. Who are the key stakeholders in this case.

3. What are the ethical issues faced by both Carley and Christina?  

4. Explain at least five alternatives that Carley can take to try to resolve the issues CMS is facing and explain the pros and cons of each one.

5. Choose the action you would take and explain why?

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