Kathryn Goldsmith is the chief accountant for Clean Sweep, a national carpet-cleaning service with a December fiscal year-end. As Kathryn was preparing the 2011 financial statements for Clean Sweep, she noticed several odd transactions in the general ledger for December. For example, rent for January 2012, which was paid in December 2011, was recorded by debiting rent expense instead of prepaid rent. In another transaction, Kathryn noticed that the use of supplies was recorded with a debit to insurance expense instead of supplies expense. Upon further investigation, Kathryn discovered that the December ledger contained numerous such mistakes. Even with the mistakes, the trial balance still balanced. Kathryn traced all of the mistakes back to a recently hired bookkeeper, Ben Goldsmith, Kathryn’s son. Kathryn had hired Ben to help out in the accounting department over Christmas break so that he could earn some extra money for school. After discussing the situation with Ben, Kathryn determined that Ben’s mistakes were all unintentional.
Required:
1. What ethical issues are involved?
2. What are Kathryn’s alternatives? Which would be the most ethical alternative to choose?