Question

Ellyn 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. Ellyn is hurriedly trying to prepare a transaction analysis to assist her in preparing the financial statements. The total of the liabilities and owner's equity exceeds the total assets by $1,000. In order to meet the 4 pm deadline, Ellyn decides to force the transaction analysis 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. Ellyn "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 final information is already late.
In your discussion posting address ALL questions but not limit to the following questions:

a. Who are the stakeholders in this situation?
b. What are the ethical issues involved in this case?
c. What are Ellyn's alternatives?

Answer 1

Answer and Explanation:

A. Stakeholders in the situation are:

1. Ellyn

2. The company

3. People using the financial statements

B. Ethical issues include:

1. Ellyn being dishonest by adding $1000 to the equipment asset and mistating the numerical value. This could cause loss as the $1000 could be from a liability account

C. Alternatives:

1. Creating a suspense account for the difference of $1000

2. Postponing finalisation and escalating the issue to a senior accountant to find out where the difference is from