Question

What are the ethical issues involved in this accounting situation?

Danny Bern is an accountant for Hot-Chip Company. Early this year Danny made a highly favorable projection of sales and profits over the next 3 years for its hot-selling computer PLEX. As a result of the projections Danny presented to senior management, they 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 work force slightly.

Unfortunately Danny rechecked his computations on the projections 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. Danny, however, is not sure what to do. Should he confess his honest mistake and jeopardize his possible promotion? He suspect that no one will catch the error because sales of PLEX have exceeded his projections, and it appears that profits will materialize close to his projections.

Answers

There is nothing unethical about this situation. He is off on PROJECTIONS. PROJECTIONS are not supposed to be dead accurate, they are just educated guesses no matter how much research/time goes into them. I honestly do not see any ethical dilemmas with the situation but if your asking, I'm sure your doing it for school or something and they are asking you to define the unethical situation. So, in that case, yes it would be unethical for the accountant to not say anything about his error because it may lead the company to move assets into places where they do not belong, transfer employees, etc.

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