Question

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 repared 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

Answer(a): Stakeholders- Are the persons who are directly or indirectly related to the company. There are internal and external stakeholders.

Internal stakeholders- Those are within the organization, examples; Shareholders, creditors, employees, managers etc.

External stakeholders- Those are outside the organization, examples; Public, society, Government.

Answer(2): Ethical issue involved- Ethics are the moral values and principles.

In this question, Jessica is taking undue advantage of her designation. She is deliberately doing accounting mistake just to meet the deadline. She is doing window dressing in the accounts so the accounts look good. She is not following the accounting rules and principles. Her accounting mistake will effect the financial statements.

Answer(3): Jessica's alternatives: Are as following-

• She should have had word with her manager about the issue and the deadline, firstly, she should have completed the work by deadline but if she could not then she should have requested to her manager or concerned person to give some relaxation or grace period.
• Now when the financial statements have been made, she should rectify the accounting errors and make the proper adjustments in the balance sheet to show the correct picture of financial transaction.