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In: Accounting

Nicole Martins is the controller at UMC Corp., a publicly-traded manufacturing company. Last year, UMC had...

Nicole Martins is the controller at UMC Corp., a publicly-traded manufacturing company. Last year, UMC had annual sales revenue of $15 million. The first quarter of this year just ended, and Nicole needs to prepare a trial balance so she can prepare the quarterly financial statements. However, trial balance is out of balance by $750 (credits exceed debits). Nicole is running out of time as the report is due today! Therefore, she decides to balance by plugging the $750 into the Equipment account. She chose the Equipment account because it has the largest account balance. Therefore, with the $750 added, it will be the least-misstated account. Identify the stakeholders in the case. Explain the ethical issues the case involves. If you were Nicole, what would you do?

Solutions

Expert Solution

1. In any case the stakeholders of a company are - Shareholders(owners), Clients (Purchasers), Suppliers, Employees, Unions, Government and its Regulatory bodies

2. There are two possibilities of mismatch of $750-

a)Having an excess of $750 could mean that a client or a supplier didn't receive a refund or was overcharged by $750, meaning that once the transaction is not rightfully recorded, the client or supplier would forever loose that amount, or
b)It could also mean that the firm overpaid a supplier and failure to record the transaction correctly means that the firm will loose the funds.

Therefore,
a)Improper recording of the transaction shows negligence on the part of Nicole in conducting her activities by failure to not disclose the excess credit
b)also nicole adding that amount to equipment account in haste is unprofessional

The issues mentioned above make her integrity questionable.

3. If I were Nicole, I would carry out a thorough reconciliation of all accounts to see if I can trace the excess amount.
I would also request for additional time from the management if the problem is not sought out in time.
(It is always best to present a true and fair view of the financial statements of a company due to interest of all stakeholders involved)

ekkarill92 answered 1 year ago
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