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Discovery of financial error

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.

a. Who are the stakeholders in this situation?

b. What are the ethical issues involved in this situation?

c. What would you as a CFO do in this situation?

Solution Preview

Hi there,

Here are your answers:

Question: Who are the stakeholders in this situation?

Answer: The stakeholders are the shareholders of the company or even potential investors and readers of SAL Inc's financial reports. These are the people that stand to be affected by how the financial results of the company are communicated to the public.

Question: What are the ...

$2.19