Use the passage below to complete the exercise that follows. Swiss Tech Snowboards is a sole proprietorship that manufactures snowboards and snowboarding equipment. In the past, the company has done quite well, and the owner is satisfied with the rate of growth. However, the economy is now going through a period of recession, sales are slower than in previous years, and it is getting more and more difficult to secure much needed credit from the banks. It is the end of the financial year and the controller of the company is concerned that the company will not be able to obtain the credit necessary to continue operations.

As he prepares the end-of-year financial statements, the controller decides to record as sales a load of snowboards and bindings that has not yet been shipped to the client. The controller feels that this will improve the company balance sheet and make it easier to obtain credit. However, the better-than- expected numbers surprise the owner who then asks for a bigger loan than previously planned. With the additional money, he plans to pursue new product development and fund a marketing campaign to promote his products to new target markets.
Upon receiving Swiss Tech's loan application, the loan officer asks for audited financial statements. The owner asks an auditing firm to prepare the documents, and it comes up with a much more pessimistic picture of the company's financial position than the one initially presented by the company's controller.

Using your knowledge of business, write an essay in which you:

QNO1: critique the decisions made by the controller and owner of Swiss Tech in the case study presented above and explain why their actions were problematic;and