Do you perceive an ethical dilemma

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Question - Late on Thursday afternoon, Joy Martin, a veteran audit manager with a regional CPA form, was reviewing documents for a long-time client of a form ATM Transport. The year-end audit was scheduled to begin Monday.

For three months, the economy had been in a down cycle and the transportation industry was particularly hard hit. As a result, Joy expected AMT's financial results would not be pleasant news to shareholders. However, what Joy saw in the preliminary statements made her sigh aloud. Results were much worse than she feared.

"Larry (the company president) already is in the doghouse with shareholders," Joy thought to herself. "When they see these numbers, they'll hang him out to dry."

"I would if he's considered some strategic accounting changes, "she thought, after reflecting on the situation. "The bad news could be softened quite a bit by changing inventory methods from LIFO to FIFO or reconsidering some of the estimates used in other areas."

1. How would the actions contemplated contribute toward "softening" the bad news?

2. Do you perceive an ethical dilemma? What would be the likely impact of following up on Joy's thoughts? Who would benefit? Who would be injured?

Reference no: EM132926439

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