Question

Vanessa Jones is the assistant chief accountant at IBT 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 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 agenicies. THe total credits on the trial balance exceed the debits by $1,000.
In order to meet the 4pm 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.

A. Who are the stakeholders in this situation?

B. What ethical issues are involved?

C. What are Vanessa's alternatives?

Answer 1

Answer and Explanation:

The stakeholders include:

1. The rush in preparing the financial statements for the quarter

2. The overstatement of an account by $1000 on either the debit or credit side of the trial balance

Ethical issues:

1. She has been dishonest by plugging a figures $1000 into a wrong account

2. There could be loss of cash as the difference of $1000 could be caused by a liability account

Alternatives:

1. A suspense account could have been opened for the difference of $1000 and plugged into the trial balance

2. An account with the difference $1000 unknown could have been opened