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Wilderness Guide Services, Inc. and SAL Inc

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As the CFO of SAL Inc., you discover a misstatement that overstated net income in the prior year's financial statements. The misleading financial statements appear in the company's annual report that was issued to banks and other creditors less than a month ago. After much thought about the consequences of telling the president about this misstatement, you gather your courage to inform him. The president suggests that you simply adjust this year's financial statements since what the banks and creditors don't know won't hurt them.
Answer the following questions related to the above information:
Who are the stakeholders in this situation?
What are the ethical issues involved in this situation?
What would you as a CFO do in this situation?

Wilderness Guide Services, Inc., performs adjusting entries every month, but closes its accounts only at year-end. The company 's year-end adjusted trial balance dated December 31,2002, follows:

WILDERNESS GUIDE SERVICES, INC.
Adjusted Trial Balance
December 31, 2002

Cash $12,200
Accounts receivable 31,000
Camping supplies 7,900
Unexpired insurance policies 2,400
Equipment 70,000
Accumulated depreciation: equipment $60,000
Notes payable (due 4/1/03) 18,000
Accounts payable 9,500
Capital stock 25,000
Retained earnings 15,000
Dividends 1,000
Guide revenue earned 102,000
Salary expense 87,500
Camping supply expense 1,200
Insurance expense 9,600
Depreciation expense: equipment 5,000
Interest expense 1,700
$229,500 $229,500

Prepare an income statement for the year ended December 31, 2002.

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1. As the CFO of SAL Inc., you discover a misstatement that overstated net income in the prior year's financial statements. The misleading financial statements appear in the company's annual report that was issued to banks and other creditors less than a month ago. After much thought about the consequences of telling the president about this misstatement, you gather your courage to inform him. The president suggests that you simply adjust this year's financial statements since what the banks and creditors don't know won't hurt them.
Answer the following questions related to the above information:
 Who are the stakeholders in this ...

Solution Summary

This solution is comprised of a detailed explanation to answer who are the stakeholders in this situation, what are the ethical issues involved and what should CFO do.

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