Posted: March 12th, 2023

ETHICAL DILEMMA

 The management of the Auto Parts Division of the Santana Corporation receives a bonus if the division’s income achieves a specific target. For 2021, 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 the gross accounts receivable for 2021 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. 

Required:

Does Mary Beth’s proposal present an ethical dilemma?  Identify the following:

Step 1—The Facts:

Step 2—The Ethical Issue and the Stakeholders:

Step 3—Values: 

Step 4—Alternatives:

Step 5—Evaluation of Alternatives in Terms of Values:

Step 6—Consequences:

Step 7—Decision: Student must decide their course of action.

Submit a 1- to 2-page response as a Word document.