Ron Hollister is a member of a group of students who have been given an accounting assignment by their professor. Ron is responsible for the portion of the assignment that requires the preparation of the trial balance and the financial statements. The assignment is due within an hour and Ron is working alone. All he has to do is complete his part of the assignment and hand the entire document in for grading. He has just prepared the trial balance and found out that it does not balance. Th e total credits are greater than the total debits by $810.
Without telling the other members of the group, Ron forces the trial balance to balance by adding $810 to the general and administrative expense because it was the largest expense and he hoped no one would notice the difference. He wished that he had a few more hours to fi nd out why the trial balance did not balance, but he knows he can’t miss the deadline for handing in the assignment.
Instructions
(a) Who are the stakeholders in this situation?
(b) What ethical issues are involved?
(c) What are Ron’s alternatives?
(d) Would your answer change if Ron was a professional accountant and was preparing financial statements for a public company?
SOLUTION
(a) The stakeholders in this situation are:
Ron Hollister
The other students in the group who will be graded for Ron’s work
The other students in the class
The professor
The College or University attended by Ron
Future employers of the graduates of the school
(b) By adding $810 to the General and Administrative Expense account, the account total is inten¬tionally misstated. By not locating the error causing the imbalance, some other account or accounts may also be misstated by a net amount of $810. Although the assignment will not affect external users of a real financial report, it is intended to resemble a real life situation and Ron’s reaction, had it been in a real life situation, is unethical. Ron did not advise his fellow team members of the action he has taken to avoid detection. They will be affected by his actions and had no means of agreeing to the strategy taken to address the problem. The adding of the $810 to the General and Administrative Expense account is not by itself unethical but his failure to inform other group members that he was changing amounts that they had prepared is wrong. Although Ron is not likely in breach of any rule or directive issued by the school concerning academic integrity, the professor and the other group members will not agree with the strategy used by Ron. They will wonder if this is the type of action Ron would take while at a future job. Such actions would then affect others who are not part of the school community and the reputation of the school would be diminished. This in turn could affect society’s opinion of the past and future graduates of the school.
(c) Ron's alternatives are:
1. Discuss the situation with the teammates and reach a consensus that it is better to miss the deadline but find the error causing the imbalance and suffer the corresponding penalty for submitting the assignment late.
2. Discuss the situation with teammates and reach a consensus to tell the professor of the imbalance and ask for an extension of time or suffer the consequences.
3. Discuss the situation with teammates and potentially get their assistance to locate the error causing the imbalance as a team effort so that the assignment can still submitted by the deadline.
(d) External users of the financial information prepared by Ron could potentially be affected by the errors that remain undetected. It is highly likely that another account is wrong on the financial statements. The consequences are more far reaching and so the behaviour is more serious. Deception for personal benefit is clearly viewed as unethical.