Robert Turnbull president of Turnbull Industries wishes to issue a press release to bolster
his company%u2019s image and maybe even its stock price which has been gradually falling. As controlleryou have been asked to provide a list of 20 fi nancial
ratios along with some other operating statistics
relative to Turnbull Industries%u2019 fi rst quarter fi nancials and operations.
Two days after you provide the ratios and data requested Perry Jarvis the public relations
director of Turnbull asks you to prove the accuracy of the fi nancial and operating data contained
in the press release written by the president and edited by Perry. In the press release the president
highlights the sales increase of 25% over last year%u2019s fi rst quarter and the positive change in the current
ratio from 1.5:1 last year to 3:1 this year. He also emphasizes that production was up 50% over
the prior year%u2019s fi rst quarter.
You note that the press release contains only positive or improved ratios and none of the negative
or deteriorated ratios. For instance no mention is made that the debt to total assets ratio has
increased from 35% to 55% that inventories are up 89% and that while the current ratio improved
the acid-test ratio fell from 1:1 to. 5:1. Nor is there any mention that the reported profi t for the
quarter would have been a loss had not the estimated lives of Turnbull%u2019s plant and machinery been
increased by 30%. Perry emphasized %u201CThe prez wants this release by early this afternoon.%u201D
(a) Who are the stakeholders in this situation?
(b) Is there anything unethical in president Turnbull%u2019s actions?
(c) Should you as controller remain silent? Does Perry have any responsibility?