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What ethical issue is at stake

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Question - The WGN Company has a bonus arrangement, which grants the financial vice president and other executives a $15,000 bonus if the net income exceeds the previous year's by $1,000,000. Noting that the current financial statements report an increase of $950,000 in the net income, Vice President Jack Brickhouse asks Louise Boudreau, the controller, to reduce the estimate of warranty expense to $60,000. The present estimate of warranty expense is $500,000 and is known by both Brickhouse and Boudreau to be a fairly "soft" amount.

Required - Answer the following questions:

1. Should Boudreau lower her estimate?

2. What ethical issue is at stake? Would anyone be harmed by the change in estimate?

3. Is Brickhouse acting ethically?

Reference no: EM133114238

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