Scenario:

You are an accounting manager at a mid-sized public company with annual Revenues around $200M and Net Income around $15M. The 2017 year has ended and you've been working hard to close the books and support the audit. The company has released earnings (which requires some audit procedures and the "ok" from the audit firm) to the public and is now in the process of wrapping up the full 10K financial report to file with the SEC with the accompanying audit. That's when you realize your team failed to accrue several bonuses before the books were closed totaling $75,000.

Requirement:

Please write a memo (1-1.5 pages) addressed to the CFO regarding this issue. Include the following in your memo:

1) Description of the error and analysis of the error's effects on the financials in 2017 and 2018 as it now stands (what accounts are over/understated each year).

2) Outline two alternatives for handling the error. Here are some things to think about: earnings have been reported, 10k has not been filed, do you tell the auditors?, what is the accounting guidance? If you've had an audit course, you may want to draw on some of that knowledge but it is not required.

3) Make a recommendation and explain why the company should pursue that course.

4) Whenever there is an error, we need to consider internal controls. Explain what control(s) will be put in place to avoid this problem in the future.