Case Study: Business Ethics

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ACCT 201
Ethics Case*
Fall 2012

NAME: Janika Washington________________

MAJOR: Business Management____________

Please complete items 1 through 4 by typing in your answers in the space provided and then printing TWO (2) copies of the completed case and submitting both copies in class on the date specified by your instructor.

As the controller of LNP Company, Amy discovers a misstatement that overstated net income in the prior year’s financial statements. The misleading financial statements appear in the company’s annual report which was issued to banks and other creditors less than a month ago. After much thought about the consequences of telling the president, Nick Oliver, about this misstatement, Amy gathers her courage to inform him. Nick says, “Hey! What they don’t know won’t hurt them. But, just so we set the record straight, we’ll adjust this year’s financial statements for last year’s misstatement. We can absorb that misstatement better in this year than in last year anyway! Just don’t make such a mistake again.” REQUIRED:

1. What are the ethical issues?

The ethical issues are a misstatement that overstated net income in the prior year’s financial statements, and the dishonesty that Nick and Amy portrayed. Nick was acting unethically for handling the misstatement is as if it was a minor issue and not resolving the problem. Amy was acting unethically for not taking the situation a step further and reporting it to the person that oversees Nick.

2. Who are the stakeholders? (at least 3)

The stakeholders are LNP Company, Amy, and Nick Oliver.

3. How is each stakeholder you listed in #2 affected? (Be specific).

LNP Company is affected in ways of loss of employees, difficulties in hiring new employees for that no one wants to work for a company that has a bad reputation, losing investments from existing investors, potential loss of future investors, and risks of losing what value the company is worth. Amy and Nick...
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