Discussion Byp 3-6 Question - Financial Accounting

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a) Who are the stakeholders in this situation? In this situation the stakeholders are Vu Hung the assistant chief accountant at Lim Company, along with all the users of the financial statements. The external users of the financial statements would be any of the company’s creditor’s along with the bank(s) that Lim Company performs transactions with. The internal users would be the chief accountant who would be reviewing all of Vu’s reporting along with management and owners of the company and all the regulator agencies mentioned in this case. There would be other stakeholders that were not mentioned such as other employees and suppliers as the detail in the financial statements are not accurate and decisions and assumptions would be made with incorrect information. b) What are the ethical issues involved? The ethical issue in this case is that Vu misstated the financials of Lim Company. Even though the value appears low and immaterial being only $1,000 to the equipment account the value represented in this account is now incorrect and the correct account(s) where the $1,000 should be located is now misstated as well. All transactions have two sides that need to be recorded correctly. Vu did not take the time to determine the location of the error that is causing the imbalance and rectify the unidentified issue. The error also may not be just in one area it could be a combination of multiple errors which could have a material effect on the financial statements. Although this could appear immaterial depending on the size of the company overall the intent is not to try to cover up an error but “plugging in” values to make the financial statements complete. This is committing fraud and consequences will occur regardless the value of the error. Vu has stated the equipment value incorrectly to cover up a possibility of embezzlement which she may

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