Healthy Living Ltd provides private healthcare cover for its customers. At the end of the reporting period, the business information system manager, Con Puter, found that the companys accounting system had been infected by a computer virus and any general ledger account balances could not be relied upon. Con advised the chief financial officer, Abit Crooked, and the chief executive officer, Alot Crooked, that the profit reports would be delayed extensively while the software was cleaned up and the virus removed. Alot Crooked said that he needed to issue a press release for the profit figures and didnt want this to be delayed because shareholders would think something was wrong with the company. He explained to his brother, Abit Crooked, it was not in the shareholders best interest to delay profit figures and asked him to estimate them so that the press release would not be late. Abit Crooked argued that he did not have documentation or other sources of information on which to base the estimates because they depended on the computer to determine how many health cover insurance contracts had been sold. Alot Crooked suggested that this should not be a problem because accounting uses a lot of estimates and judgements. He added that this was what was meant by timeliness, which Alot Crooked recalled was mentioned in an accounting textbook he had read a long time ago.

(a) Who are the stakeholders in this situation?

(b) Is Alot Crooked correct about the estimation of revenue, expenses and profit for the period being consistent with the timeliness constraint?

(c) Would the actions requested by Alot Crooked be consistent with generally accepted accounting principles?

(d) Would reporting estimated figures be ethical?

(e) What do you think would be the possible consequences of a significant error in the estimation that overestimated profit?