You are the controller of Small Toys Inc. Marta Johns, the president, recently mentioned to you that she found an error in the 2013 financial statements which she believes has corrected itself. She determined, in discussions with the Purchasing Department, that 2013 ending inventory was overstated by $1 million. Marta says that the 2014 ending inventory is correct. Thus, she assumes that 2014 income is correct. Marta says to you, ‘What happened has happened—there’s no point in worrying about it anymore.”

Instructions
You conclude that Marta is incorrect. Write a brief, tactful memo to Marta, clarifying the situation.