You are the controller of Small Toys Inc. Joy Small, the president, recently mentioned to you that she found an error in the 2000 financial statements which she believes has corrected itself. She determined, in discussions with the purchasing department, that 2000 ending inventory was overstated by $1 million. Joy says that the 2001 ending inventory is correct, and she assumes that 2001 income is correct. Joy says to you,

“What happened has happened—there’s no point in worrying about it anymore.”

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

ETHICS CASE