Discussion and 2 replies

Vanessa Jones is the assistant chief accountant at IBT Company, a manufacturer of computer chips and cell phones. The company presently has total sales of $20 million. It is the end of the first quarter and Vanessa 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, Vanessa decides to force the debits and credits into balance by adding the amount of the difference to the Equipment account. She chose Equipment because it is one of the larger account balances; percentage-wise, it will be the least misstated. Vanessa plugs the difference! She believes that the difference is quite small and 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

Who are the stakeholders in this situation?

What ethical issues are involved?

What are Vanessa’s alternatives?

Post by classmate 1

 

Who are the stakeholders in this situation?

A stakeholder is anyone involved with the outcomes of an organization (Friedman & Miles, 2006). They could be the customer, an employee, an investor, or even the customers. Vanessa would be considered a stakeholder as an employee, the management, regulatory agencies, and anyone this decision in smudging the books on her part will affect as an outcome is a stake holder.

What ethical issues are involved?

Vanessa is violating ethics by purposefully misleading stakeholders in her fraudulent financial reporting (Eresi, 2017). Accounting is about clarity and accountability, and the falsifying or alteration of documents introduces fraud and has severe consequences (Eresi, 2017). 

What are Vanessa’s alternatives?

Vanessa needs to double and triple check her work, or phone a friend to check her work to make sure it is correct this far. After the fact, she should go and admit to her supervisor the situation and her actions. She also could ask her supervisor for an extension and understanding before she commits an unethical act. A corporation and supervisor would rather be protected with accurate documentation that’s late instead of opening themselves to an audit and fraud. 

References

Eresi, K. (2017). Ethical issues in accounting from ancient times to recent times. 3D: IBA Journal Management & Leadership, 9(1), 68-76.

Friedman, A., & Miles, S. (2006). Stakeholders: Theory and Practice. OUP Oxford.

Post by classmate 2

 

Who are the stakeholders in this situation?

The stakeholders in this situation are Vanessa Jones, the C-level employees at her company, and the shareholders of stock within the company. Vanessa is a stakeholder because she is directly involved in the decision to force balance the debits and credits. The C-level employees are stakeholders because they oversee the company and are awaiting Vanessa’s trial balance to produce quarterly financial statements (with accuracy). The shareholders also await accurate quarterly financial statements which they may use to make decisions on their positions/investments with the company.

What ethical issues are involved?

The ethical issues involved are the deception that the credits and debits are balanced and accurate. Vanessa has added the $1,000 difference in credit to the equipment account due to its large account balances to balance the credits/debits. This is a quick fix that does not accurately represent the numbers. A problem still exists within the ledger and that problem needs to be accounted for to avoid more accounting errors in the future statements. The error is small at the moment (compared to the company’s total sales), however a small error can grow and skew numbers as the company’s financials move forward with time. Shareholders will use the information used in quarterly financial statements (which will be influenced by Vanessa’s decision) to weigh their options with the company moving forward. This small quick fix could skew a shareholder’s decision through “deception.” Mastracchio et al. state that “users of financial statements rely on the judgment of the accountants who prepare the statements and the opinion of the auditors who audit them” (2015). The preceding quote defines the problems that Vanessa’s “small” fix could incur on the other employees within her company and the shareholders within the public.

What are Vanessa’s alternatives?

Vanessa could go to her direct superior and explain the accounting problem truthfully. This does not change the timetable needed to produce quarterly statements, but it does relay information up the chain of command. Transparent information regarding the present issue could lead to a second set of eyes on the numbers producing the trial balance sheet. Honesty and transparency are a better option than deception, especially if the problem compounds on itself in the future.

References

Mastracchio Jr., N. J., Jiménez-Angueira, C., & Toth, I. (2015). The State of Ethics in Business and the Accounting Profession. CPA Journal, 85(3), 48–52.