Question

F9 pe 25 points lo Bibliography Essay: Jessica Warren is the assistant chief accountant at Kellner 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: Jessica is hurriedly trying to prepare a trial balance so that 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 4p.m. deadline, Jessica decides to force the debits and credits into the 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. Jessica "plugs" the difference! She believe the difference will not affect anyone's decisions. She wished she had a few days to find the error but realizes the financial statements are already late. Instructions: a) Who are the stakeholders? b) What are the ethical issues involved in this case? c) What are Jessica's alternatives? 20 points

Answer 1

a.

Answer: Management and regulatory agencies are the stakeholders.

They are stakeholders, because they are the top authorities of the company. Therefore, they are liable of company’s conducts, which reflects through the trial balance and financial statements.

b.

Answer: Stakeholders are misguided through the wrong submission of accounts. Their decision making could be affected.

The correct figure of equipment is $1,000 less than what shown. Moreover, there may be a mistake in ledger posting in other accounts, which are not rectified. The stakeholders could have been informed about such mismatching so that they should not take any decision right now.

c.

Answer: Suspense account could be created instead of increasing equipment value.

The difference of $1,000 should be increased in the debit side so that the trial balance gets tally. If it is shown under the head suspense the stakeholders become aware the mismatch. It becomes fair then on behalf of the accountant.