Ethics Cases Ellynn Kole is the assistant chief accountant at Doman Company, a m

Question

Ethics Cases

Ellynn 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. Ellynn 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 4 p.m. deadline, Ellynn decides to force the debits and credits 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. Ellynn “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.

Instructions

(a)  

Who are the stakeholders in this situation?

(b)  

What are the ethical issues involved in this case?

(c)  

What are Ellynn's alternatives?

Explanation / Answer

a. The stakeholders in the situation are the 1) Shareholders 2)The regulatory agencies 3) The analysts and 4) the prospective investors.

b. The statements are being drawn from a forced trial balance where equipment is forced to exceed $1000. The percentage increase to total sales is 0.005 (ie. 1000 / 20m). The effect on the overall positions of the calculation is almost negligible, so there is no wrong done by Ellynn on personal basis, but ethically she is wrong to match the trial balance forcely and mislead the stakeholders by drawing wrong statements. Whenever she find the mistake, a revise statements has to be submitted to all stakeholders.

c. No there is no alternative left with Ellynn if she would not able to find the mistake and match the trial balance. This is the only alternative at the last moment to tally the trial balance.

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