Question: as the chief financial officer cfo of abc inc you...
As the Chief Financial Officer (CFO) of ABC Inc., you discover a misstatement that overstated net income (i.e., profit) in the prior year’s financial statements. The misleading financial statements appear in the company’s annual report that was issued to banks and other creditors less than a month ago. After much thought about the consequences of telling the president about this misstatement, you gather your courage to inform her. The president suggests that you simply adjust this year’s financial statements since, “what the banks and creditors don’t know won’t hurt them.”
a. What are the ethical issues involved in this situation?
b. What would you as a CFO do in this situation?