• Who are the stakeholders in this situation? Should they be the preparers’ main concern? Why? Why not?

In this situation, the stakeholders of Wesley Corporation are the president and CEO Samuel Gunkle, the controller Gerald Rondelli, the board and 10 stockholders. The stakeholders of the company should be the preparers’ main concern. They need to be honest with their work and report correct information. Failure to do so will adversely affect the stakeholders since they have shown interest and invested their resources in the company.

• Was there anything unethical about the President’s actions? Was there anything unethical about the controller’s actions? Explain.

The president stated that “We must get that amount above $1 million.” Such an action was enough to put pressure on the controller. Similarly, he continued by saying that “I know you won’t let me down, Gerald.” The controller was encouraged to act unethically because he was persuaded and pressurized by the president. On the other hand, the controller’s actions were also unethical. He intentionally misclassified the cash flow from a long-term note and reported them as “increase in payables.”

• Are the board members or anyone else likely to discover the misclassification? Explain.

It is unlikely that the board members will discover the misclassification since they do not have detailed knowledge on the company’s transactions. However, board members who are also officers of the corporation have the chance to detect the misclassification. Second, the bank officer who gave out the loan will only detect the misclassification after scrutinizing the corporation’s statement of cash flow. Also, the bank officer can discover the misclassification by closely scrutinizing the balance sheet since it will show an increase in notes payable with no comparable financing activities in the corporation’s statement of cash flow.

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