Question

Wellcovered Insurance Ltd sells general insurance policies. At the end of the reporting period, the business information system manager, Mark Duncan, found that the company’s accounting system had been infected by a computer virus and any general ledger account balances could not be relied upon. Mark advised the chief financial officer, Ben Nguyen, and the chief executive officer, Sarah Chan, that the profit reports would be delayed extensively while the software was disinfected. Sarah said that she needed to issue a press release for the profit figures and didn’t want this to be delayed because stakeholders would think something was wrong with the company. She explained to Ben that it was not in the shareholders’ best interests to delay profit figures and asked him to estimate them so that the press release would not be late. Ben 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 insurance contracts had been sold. Sarah countered that this should not be a problem because accounting uses a lot of estimates and judgements. She added that this was what was meant by timeliness, which Sarah recalled was mentioned in an accounting textbook she had read a long time ago.

Required

Who are the stakeholders in this situation?

Answer 1

The stakeholders in this situation include shareholders, employees, creditors, customers, and regulators.

Step-by-step explanation:

The stakeholders in this situation are the individuals or groups that have an interest in or are affected by the financial performance of Well covered Insurance Ltd. These stakeholders include:

• Shareholders: They have the ownership of the company and therefore have a financial interest in its profit figures.
• Employees: They rely on the company's financial performance for job security and potential bonuses or incentives.
• Creditors: They lend money to the company and need accurate profit figures to assess the company's ability to repay debts.
• Customers: They may be affected by changes in the company's financial position, which could impact service quality or pricing.
• Regulators: They oversee the company's operations and need reliable profit figures to ensure compliance with financial regulations.