Candy Bars Ltd produces several varieties of candy and chocolate bars. An action has been brought against the entity by a customer who broke a tooth while eating one of the entity’s chewy chocolate bars. The managing director of Candy Bars Ltd has suggested that this should not be reported as a contingent liability because the entity might win the case, and any mention of this in the financial statements could encourage more law suits and increase the entity’s liability.

Required

(a) Who are the stakeholders in this situation?

(b) Who would be potentially harmed or disadvantaged by non-disclosure of the contingent liability?

(c) Are the managing director’s actions ethical?