East Coast brokerage firms
You are an accountant in the budgetary, projections, and special projects department of Fernetti Conductor, Inc., a large manufacturing company. The president, Richard Brown, asks you on very short notice to prepare some sales and income projections covering the next 2 years of the company’s much-heralded new product lines. He wants these projections for a series of speeches he is making while on a 2-week trip to eight East Coast brokerage firms. The president hopes to bolster Fernetti’s stock sales and price.
You work 23 hours in 2 days to compile the projections, hand-deliver them to the president, and are swiftly but graciously thanked as he departs. A week later, you find time to go over some of your computations and discover a miscalculation that makes the projections grossly overstated. You quickly inquire about the president’s itinerary and learn that he has made half of his speeches and has half yet to make. You are in a quandary as to what to do.
Instructions
What are the consequences of telling the president of your gross miscalculations?
What are the consequences of not telling the president of your gross miscalculations?
What are the ethical considerations to you and the president in this situation?
Sample Solution
Consequences of telling the president
- The president will be embarrassed and may lose credibility with the brokerage firms.
- The company's stock price may fall.
- The president may blame you for the mistake and you could lose your job.
- However, telling the truth is the ethical thing to do and it will help to ensure that the president does not make any further mistakes based on the inaccurate projections.
Full Answer Section
Consequences of not telling the president- The president may continue to make speeches based on the inaccurate projections, which could mislead the brokerage firms and harm the company's reputation.
- The company's stock price may fall.
- The president may be accused of fraud if the inaccuracy is later discovered.
- If you are found to have known about the inaccuracy and did not tell the president, you could also be accused of fraud and could lose your job.
- As an accountant, you have a duty to be honest and accurate in your work.
- You also have a duty to your employer to avoid misleading them.
- In this situation, the ethical thing to do is to tell the president about the mistake, even though it may have negative consequences for you.
- The severity of the miscalculation. If the miscalculation is minor, it may be less important to tell the president. However, if the miscalculation is major, it is important to tell him as soon as possible.
- The likelihood that the president will find out about the miscalculation on his own. If the president is likely to find out about the miscalculation on his own, it may be better to tell him yourself. This will give you a chance to explain the situation and to minimize the damage.