On January 1, MBC installed a new computer system for tracking and calculating inventory costs. On December 31, at years-end closing, MBC's system reported inventory at $4.5million for financial statement purposes. At midnight, the auditors performed a physical inventory count and found the inventory total to be $3.5 million. To correct the discrepancy, MBC's accounting staff processed an adjusting entry to reduce inventory by $1.0 million. The next day, 2 accountants were discussing the events of the previous night. Accountants A & B have differing opinions as to their findings and the necessary actions needed to correct this problem.

Accountant A believed the audit results proved good system controls were in place which allowed for the error in inventory counts to be discovered and corrected prior to reporting final results to management. Accountant B believed that stronger and more effective system controls should have been implemented and viewed the inventory discrepancy as evidence that better policies and procedures were needed to strengthen the system controls and prevent inventory errors from occurring again in the future.

Discuss the perspectives of each accountant and possible solutions citing using sources in a reference list.