Question

Graded Discussion Topic 1 After you have studied chapters 1-3, you are prepared to address this ethical case. Ellyn Kole is the assistant chief accountant at Doman Company, a manufacturer of computer chips and cellular phones. The company presently has total sales of $20 million. It is the end of the first quarter. Ellyn is hurriedly trying to prepare a transaction analysis to assist her in preparing the financial statements. The total of the liabilities and owner's equity exceeds the total assets by $1,000. In order to meet the 4 pm deadline, Ellyn decides to force the transaction analysis into balance by adding the amount of the difference to the Equipment account. She chooses Equipment because it is one of the larger account balances; percentage-wise, it will be the least misstated. Ellyn "plugs' the difference! She believes that the difference will not affec anyone's decisions. She wishes that she had another few days to find the error but realizes that the final information is already late. In your discussion posting address ALL questions but not limit to the following questions: a. Who are the stakeholders in this situation? b. What are the ethical issues involved in this case? c. What are Ellyn's alternatives?

Answer 1

1. The stake holders are, :
   • Ellyn Koyle herself
   • The company ie, Dorman Company
   • Other users of the financial statements.
2. The ethical issue is adding the difference found to the equipment account, making the equipment mistated and also that potential account which had an error causing the difference of $ 1000 is also imbalanced and thus mistated. Though percentage of differences compared to the turnover may appear small, but it is intentionally made violates the ethical protocols.
3. The alternatives Ellyn has are:
   • Report the difference found to her senior ie, Chief Accountant or
   • Postpone the finalisation after the due date and find out the variation and sort it out.