You are the accountant of City Jeans Ltd. Su Lee, the managing director, recently mentioned to you that she found an error in the 2015 financial statements which she believes has corrected itself. She determined, in discussions with the purchasing department, that 2015 ending inventory was overstated by $1 million. Su says that the 2016 ending inventory is correct, and she assumes that 2016 profit is correct. Su says to you, ‘What happened has happened — there’s no point in worrying about it any more.’

Required

You conclude that Su is incorrect. Write a brief, tactful memo, clarifying the situation.