This is the scenario: Learning Activity #1: The Pressure to Overstate Stock Valuation

You have been the Chief Financial Officer (CFO) for a large manufacturing company for 15 years. The Company’s year end is March 31 and you are finishing the year end accounts.

You have recently been advised by the Chief Operating Officer (COO) of a significant level of slow moving stock. The stock in question is now more than nine months old and would normally have been written down some months previously.

The shareholders are trying to sell the Company and the Chief Executive Officer (CEO), who is also the majority shareholder, has told you that it is not necessary to write down the stock in the year end accounts. You are sure that the CEO wants the financial statements to carry an inflated stock valuation because he has found a prospective buyer for the Company. The CEO has mentioned to you that if the proposed deal is successful, all employees will keep their jobs and you will receive a substantial pay increase.

Presuming you make the decision not to follow this instruction of the CEO, how could you resolve this situation diplomatically to the benefit of the company as a whole?