As the controller of Breathless Perfume Company, you discover a significant misstatement that overstated net income in the prior year's financial statements. The misleading financial statements are contained in the company's annual report, which was issued to banks and other creditors less than a month ago. After much thought about the consequences of telling the president, Eddy Kadu, about this misstatement, you gather your courage to inform him. Eddy says, "Hey! What they don't know won't hurt them. But, just so we set the record straight, we'll adjust this year's financial statements for last year's misstatement. We can absorb that misstatement better this year than last year anyway! Just don't make that kind of mistake again."

\section*{Instructions}

(a) Who are the stakeholders in this situation?

(b) What are the ethical issues?

(c) What would you do as the controller?