Question

You are an accountant in the budgetary, projections, and special projects department of Fernetti Conductor, Inc., a large manufacturing company. The president, Richard Brown, asks you on very short notice to prepare some sales and income projections covering the next 2 years of the company's much heralded new product lines. He wants these projections for a series of speeches he is making while on a 2-week trip to eight East Coast brokerage firms. The president hopes to bolster Fernetti's stock sales and price.

You work 23 hours in 2 days to compile the projections, hand-deliver them to the president, and are swiftly but graciously thanked as he departs. A week later, you find time to go over some of your computations and discover a miscalculation that makes the projections grossly overstated. You quickly inquire about the president's itinerary and learn that he has made half of his speeches and has half yet to make. You are in a quandary as to what to do.

(1) What are the consequences of telling the president of your gross miscalculations?

(2) What are the consequences of not telling the president of your gross miscalculations?

(3) What are the ethical considerations to you and the president in this situation?

Answer 1

1) It is the responsibility of the accountant to inform the president about the gross miscalculations .This is because the future investors make decisions based on these miscalculated figures It is ethical responsibility of the president to disclose the true and fair figures to the investors and the investors will have a good relation with the company.

2) If the president is not informed of miscalculations, the company will have good number of investors today.But, this will not continue for a longer period of time because the investors withdraw their funds as the targets are not reaching.

3) The accountant needs to be given longer time to prepare the sales and income projections in order to give the accurate information.The president should give correct information to the investors since the investors make decisions based upon the same information.