Hao Zhang is an accountant for Wu Ltd. Early this year, Hao made a highly favorable projection
Question:
Hao Zhang is an accountant for Wu Ltd. Early this year, Hao made a highly favorable projection of sales and profits over the next 3 years for Wu’s hot-selling computer PLEX. As a result of the projections Hao presented to senior management, the company decided to expand production in this area. This decision led to dislocations of some plant personnel who were reassigned to one of the company’s newer plants in another state. However, no one was fired, and in fact the company expanded its workforce slightly.
Unfortunately, Hao rechecked his projection computations a few months later and found that he had made an error that would have reduced his projections substantially. Luckily, sales of PLEX have exceeded projections so far, and management is satisfied with its decision. Hao, however, is not sure what to do. Should he confess his honest mistake and jeopardize his possible promotion? He suspects that no one will catch the error because PLEX sales have exceeded his projections, and it appears that profits will materialize close to his projections.
Instructions
a. Who are the stakeholders in this situation?
b. Identify the ethical issues involved in this situation.
c. What are the possible alternative actions for Hao? What would you do in Hao’s position?
StakeholdersA person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,...
Step by Step Answer:
Accounting Principles
ISBN: 978-1119419617
IFRS global edition
Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt