Question

You are employed as an accountant for Innovative Computing. Your company is in the process of signing a large contract with an electronics components supplier. You have a friend who works for the electronics components supplier, and you are aware of the company having trouble paying bills.

Respond to the following in a minimum of 175 words:

• Explain why you should or should not report this to your employer before the purchase.

Answer 1

You should report this to your employer before the purchase to prevent the risk of no payment.

The firm is in the process of signing a large contract with the electronic components suppliers. The contract involves various forms of payments to be done between the firms. The payments are to ensure the firms can easily generate the working capital which is key for their various processes and functions. In this case, you have a friend who works with the firm (electronics component supplier) and has tipped you that the firm has challenges on paying the bills. This information needs to be considered in the signing of the contract.

Therefore, reporting to your employer the fact that the company has challenges in paying bills would be key to limit the level of engagement and also add some form of covenants in the contracts to cover for the risk of non-payment. The company can also decide to cancel the agreement before the contract is signed to reduce any obligation or risk that can put the firm at loss. This is because large contracts can cost the firm billions of contract and lack of commitment to paying would mean risk of liquidity or even insolvency.