Proposal present an ethical dilemma

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Reference no: EM131266760

The management of the Auto Parts Division of the Santana Corporation receives a bonus if the division's income achieves a specific target. For 2003 the target will be achieved by a wide margin. Mary Beth Williams, the controller of the division, has been asked by Philip Stanton, the head of the division's management team, to try to reduce this year's income and "bank" some of the profits for future years.

Mary Beth suggests that the division's bad debt expense as a percentage of net credit sales for 2003 be increased from 3% to 5%. She believes that 3% is the more accurate estimate, but knows that both the corporation's internal auditors as well as the external auditors allow some flexibility when estimates are involved.

Does Mary Beth's proposal present an ethical dilemma? If you were the controller, how would you approach this situation?

Reference no: EM131266760

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