As the controller of Rainbow Perfume Company, you discover a misstatement that overstated net income in the prior years financial statements. The misleading financial statements appear in the companys annual report which was issued to the banks and other creditors less than a month ago. After much thought about the consequences of telling the president, John McNeally, about this misstatement, you gather your courage to inform him. John says, What they dont know wont hurt them. But, just so we set the record straight, well adjust this years financial statements for last years misstatement. We can absorb that misstatement better in this year than in last year anyway. Just dont make such a mistake again. Discuss at least three of the following questions:

• Who are the stakeholders in this situation?
• What are the ethical issues in this situation?
• What would you do as a controller in this situation?