the controller of Z Co. believes that the yearly allowance for doubtful accounts for Z Co. should be 2% of net credit sales. The president of Z Co. nervous that the stockholders might expect the company to sustain its 10% growth rate, suggests that the controller increase the allowance for doubtful accounts to 4%. The president thinks that the lower net income, which reflects a 6% growth rate, will be a more sustainable rate for Z Co.
What would you do? if you were the controller, would you be worried about the company's growth rate?
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I do think that this is at least something of an ethical dilemma. In essence, it seems that the company president wants you to go against your professional judgement as to the proper percentage to assign as an allowance for these doubtful accounts. It seems that the president is motivated not by a technical disagreement but by a desire to make the company look good to the people who own its stock. Thus, the president is essentially asking you to change your opinion (and maybe even lie) in order to lull investors. This seems unethical. It would certainly be a difficult spot to be in as the controller because you want to keep the job but you would rather not compromise your ethics.
I am not sure that this is necessarily an ethical dilemma, but I would be worried if I was the employee. The reason I would be worried is that the company does not seem to be financially strong. I would wonder why the numbers are changing. Is this standard practice for my industry? If the 2% is just a matter of personal opinion, and the 4% is my president’s opinion, it is different.
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