CASE 1-8

A FAULTY BUDGET
BAES. BONDOC. CHAN. MELCHOR. QUE. SALAYSAY. SEE

Ethical Issue
Whether or not to report to Pete
the mistake with the budget

Daniels projected twice the
level of sales for that product
that will likely to occur.
Factual Information
Jackson Daniels graduated
from Lynchberg State College
two years ago

He works in the accounting
department of Lynchberg
Manufacturing
Factual Information
Daniels prepared the
sales budget for 2011.

He projected sales of
250,000 units of product,
25% increase over 2010.

Factual Information
Pete is responsible for hiring
additional workers to produce the
soaking tanks.
Stakeholders & Obligation
Employees and the community
Possible for them to lose their jobs

Stockholders and creditors
Might lose actual dollars and suffer losses

Supervisor
Obligation to create an environment
where employees will admit mistakes,
sooner rather than later
All Possible Alternative
Alternative 1
Do nothing
Ignore and follow
Walkers advice to
wait and see what
happens next
(demand).


Alternative 2
Report to Pete when
the demand
does not
increase
beyond the
correct
projected level
Alternative 3
Report to Pete the
mistake in the
budget
immediately

All Possible Alternative
Alternative 1
Do nothing
Ignore and follow Walkers advice to wait
and see what happens next (demand).


If the demand does not meet sales projection
then make excuses like the demand cannot be
measured accurately and changed over time.

Philosophy involved:
Egoism - Morally wrong because
it excludes others
All Possible Alternative
Alternative 2
Report to Pete when the demand does not
increase beyond the correct projected level


Philosophy involved:
Categorical Deontologist: Act in a manner
that you could be prepared to have anyone
else in a similar situation act in a similar way
All Possible Alternative
Alternative 3
Report to Pete the mistake in the budget
immediately


Immediately tell his supervisor so that the supervisor
will not be surprised and the damage will be
lessened. All employees, especially those who are
making projections which may impact the future of
the company must act with integrity.
Coordinate with Pete and reduce the hiring and
materials being produced.
All Possible Alternative
Alternative 3
Report to Pete the mistake in the budget
immediately


Philosophy involved:
Categorical Deontologist: Act in a manner
that you could be prepared to have anyone
else in a similar situation act in a similar way
Course of Action
Should not act in personal interest but also for the
welfare of others.
Error discovered by an employee must be
reported as soon as possible with no doubts and
hesitations.

Integrity is a fundamental trait of character that
enables a CPA to withstand client and competitive
pressures that might otherwise lead to the
subordination of judgment.
- Mintz


Alternative 3
Report to Pete the mistake in the budget immediately