Meredith Ward is the assistant chief accountant at Frazier C

Meredith Ward is the assistant chief accountant at Frazier 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. Meredith is hurriedly trying to prepare a trial balance so that quarterly financial statements can be prepared and released to management and the regulatory agencies. The total credits on the trial balance exceed the debits by $1,000. In order to meet the 4 p.m. deadline, Meredith decides to force the debits and credits 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 misstatedMeredith “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 financial statements are already late.

Who are the stakeholders in this situation?

What are the ethical issues involved in this case?

What are Meredith’s alternatives?

Solution

Part A

The stakeholders in this situation are:

- the Frazier company, the company and its shareholders.

- Meredith Ward who is employee working at a position of assistant chief accountant.

- Users of the company’s financial statements.

Part B

Meredith\'saction of adding $1,000 to the Equipment account is unethical. The total of equipment account is intentionally misstated. The misstatement of equipment account by $1000 will also result into misstatement of other account by $1000 to avoid error that may arise due to imbalance. If the amount would have been immaterial and there is no intention to commit fraud (cover up an embezzlement or other misappropriation of assets), Meredith’s action might not be considered unethical in the preparation of interim financial statements. However, if Meredith is considered to be violating a company accounting policy by her action, in that case her behaviour is believed to be unethical.

Part C

Meredith’s alternatives are:

1. Identify the error causing the imbalance though it requires more time than deadline

2. She should honestly inform her supervisor of the imbalance and suffer the consequences.

3. making the adjustment in the next quarter, identifying the error after deadline