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CASE 1-8

A FAULTY BUDGET 

BAES. BONDOC. CHAN. MELCHOR. QUE. SALAYSAY. SEE

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Ethical Issue

Whether or not to report to Pete

the mistake with the budget

Daniels projected twice the

level of sales for that productthat will likely to occur.

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Factual Information

Jackson Daniels graduated

from Lynchberg State College

two years ago

He works in the accounting

department of LynchbergManufacturing

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Factual Information

Daniels prepared the

sales budget for 2011.

He projected sales of

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

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Factual Information

Pete is responsible for hiringadditional workers to produce the

soaking tanks.

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Stakeholders & Obligation

Employees and the community 

Possible for them to lose their jobs

Stockholders and creditorsMight lose actual dollars and suffer losses

SupervisorObligation to create an environmentwhere employees will admit mistakes,sooner rather than later

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All Possible Alternative

Alternative 1Do nothingIgnore and follow

Walker’s advice towait and see whathappens next(demand).

Alternative 2Report to Pete when

the demand

does notincrease

beyond the

correctprojected level

Alternative 3Report to Pete the

mistake in thebudget

immediately

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All Possible Alternative

Alternative 1Do nothingIgnore and follow Walker’s advice to waitand 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

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All Possible Alternative

Alternative 2Report 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 anyoneelse in a similar situation act in a similar way

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All Possible Alternative

Alternative 3Report to Pete the mistake in the budget

immediately

• Immediately tell his supervisor so that the supervisorwill not be surprised and the damage will belessened. All employees, especially those who aremaking projections which may impact the future of

the company must act with integrity.• Coordinate with Pete and reduce the hiring and

materials being produced.

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All Possible Alternative

Alternative 3Report to Pete the mistake in the budget

immediately

Philosophy involved:

Categorical Deontologist: Act in a manner

that you could be prepared to have anyoneelse in a similar situation act in a similar way

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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 andhesitations.

“Integrity is a fundamental trait of character thatenables a CPA to withstand client and competitive

pressures that might otherwise lead to thesubordination of judgment.” 

- Mintz

Alternative 3Report to Pete the mistake in the budget immediately