You Are the Controller for WNC Home Media

question 74

Essay

You are the controller for WNC Home Media. During the beginning of January 2014, when the company was adjusting and closing the accounting records for the calender year, you were home sick with the flu. You therefore relied on your assistant to complete much of the work. The company reported net income for 2014 of $125,000, down from $140,000 in 2013. In February, after the financial statements have been issued and distributed to the company's investors and creditors, you discover that your assistant overlooked adjustments to insurance expense, depreciation expense and utilties expense resulting in an overstatement of net income by $12,500. You immediately inform the company president of the overstatement and suggest correcting the errors and re-issuing the financial statements.The company president is concerned that investors were not happy about the lower profits reported in 2014. He feels that 2015 is going to be a better year for the company. Therefore he prefers to keep quiet about the financial statement errors in 2014 and adjust the accounting records for the errors in 2015.
Required:
(a) Who are the stakeholders in this situation?
(b) What are the ethical issues in this situation?
(c) What would you do as controller in this situation?

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Definitions:

Accounting Records

Documents and books that keep track of all financial transactions of an entity for the purpose of financial reporting.

Company Asset

Assets owned by a company, including both tangible and intangible resources, used in operating the business.

Internal Control

A process designed to provide reasonable assurance regarding the achievement of objectives related to operations, reporting, and compliance.

Safeguards

Measures or controls put in place to protect against unauthorized access, damage, or theft.