Question

Sarah Roberts is the assistant chief accountant at the HK Company, a manufacturer of computer chips and cell phones. The company presently has total sales of $20 million Sarah is hurriedly trying to prepare a general ledger trial balance so that the quarterly financial statements can be prepared and released to management and the regulatory agencies. The total credits on the trial balance exceed the debits by $1,000. In order to meet the 5 PM deadline, Sarah decides to force the debits and credits into balance by adding the amount of the difference to the Equipment account. She chose Equipment because it is one of the larger account balances; percentage-wise, it will be the least misstated. Sarah "plugs the difference! She believes that the difference will not affect anyone's decisions. She wishes that she had another few days to find the error but realizes that the financial statements are already late. REQUIRED: 1. What are the ethical issues? 2. Who are the stakeholders? (at least 3) 3. What are Sarah's alternatives? (at least 3) 4. What would you do? Explain

Answer 1

1. The ethical issues in reporting false or manipulated documents is it affects the company in long term. On the surface $1000 won't be a big deal but it affects the accuracy and authencity of the the financial statement , trail balance not matching suggests that some entries or cost are not appropriated to proper accounts . This will create a confusion or trouble in the long term . Because of time constraint she has knowingly reported false accounting statements which make this a legal as well as ethical issue.

2.The stakeholders of this decision are company , employees , shareholders and customers

the company would suffer in the long run due to inadequate reporting and could be penalized if identified by other agencies

the employees would also suffer because the mistakes have been made by them , and they had not reported the mistake , it could lead to penalty and and no promotions for the employees

the ultimate effect would be on shareholders who got false statements which could affect their decisions and their investments ,

the customers of the company would also suffer because company would have to make their equiment costly if financial statements are wrong.

3.The Sarah's alternative are

• Miss the deadline but find and correct the error.
• Report this to her supervisor and ask for more time for investigation the issue .
• Report the management about the issue and ask for extension of the deadline.
• Ask the colleagues  for help so could work faster on the issue and try to meet the deadline.
• Mention in her report that trial balance is not matching and further investigation is required in the documents.

4. I would report this to my supervisor and ask him if he could help me with the issue , so i could try to meet the deadline , if its not possible then i would inform the management about my mistake  and take the full responsibility of my action and ask them to extend the time of release of financial statements and would try to fix the trial balance as soon as possible .

P.S. - As per HOMEWORKLIB RULES could only answer a single question with multiple parts , please post other questions as separate questions .