Question

Financial Reporting: Do Small Errors Need to be Reported?

Ben is a recent Santa Clara University graduate who has just started his first job in the finance department of a publicly traded Silicon Valley company. One of his main responsibilities is to create and distribute extensive Microsoft Excel reports that analyze costs and revenues for different divisions. Ben sends completed reports to his direct supervisor and the CFO. The CFO then uses the information to create the company's financial reports, in addition to the strategy and forecasting formulation.

While Ben considers himself to be detailed-oriented, the complicated nature of and the sheer volume of data sometimes overwhelm him, which is exacerbated by their strict deadlines. While Ben works hard to prepare the reports as accurately as possible, he often finds errors after he has submitted his final report. When the errors are critical, he revises the reports and resends them. However, some of the errors are minor, in Ben's estimation, and he doubts that the CFO will use or look at these figures. Ben is ambitious and wants to be promoted, but worries that if he frequently sends out revised reports he will appear unreliable and unqualified. At the same time, the potential consequences from inaccurate financial reports put the company, the CFO and CEO, and Ben himself at risk.

Think about... What actions should Ben take when he catches a mistake? Is he obligated to report every error, particularly since he works for a publicly traded company? Is there such a thing as a small error in this context?

For your post, put yourself in Ben's shoes... You have a family at home that you provide for. What would you do if you caught one of your own errors? Does the amount of the error matter? Are you willing to get fired? How important is trust? How much do you value integrity?

Answer 1

Ben should report every mistake that he catches. He is obliged to do so. There is no such thing as a small error, especially in financial reporting context. Though, he thinks that the data is not important or error is insignificant in certain cases, the same data may be used or quoted by the CFO and his supervisor for various purposes leading to high impact issues that could have adverse effect for Ben, his bosses as well as the organization. Thus, it is essential that he revises every report that sees an error in; and send back to CFO and his supervisors. Importantly, he should review his work before he sends it to the management.

Considering that he wants promotion and is ready to work for it, he should consider talking to his higher management about issues that he faces - amount of data & short deadlines - leading to errors in his work. Also, considering that he is able to find mistake in his own work, it is evident, that errors are due to oversight (and hurry) rather than competence issues.  He should seek management support to get additional resource (may be an intern) or extension of deadlines; rather than resorting to shying away from admitting mistakes. He could also check with them if it is possible for enrolling himself for any training or using any tools, that could help increase speed and accuracy of his work.Such a step from Ben would ensure that management knows what issues he is facing and also futher impress on them his integrity and commitment to his work.