CT8–5 Ethics Case Sam Wong is the controller of En
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CT8–5 Ethics Case Sam Wong is the controller of Encounter Limited, a publicly traded company. He has completed an
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CT8–5 Ethics Case Sam Wong is the controller of Encounter Limited, a publicly traded company. He has completed an aging schedule and determined that the allowance for doubtful accounts should be $100,000 at the end of the current year. Sam has noticed that the average age of receivables this year is older than in prior years. The president of the company, Suzanne Chen, is nervous because the bank expects the company to maintain a current ratio of 2:1. After recording the adjustment for bad debts this year, the current assets total $2,000,000 while current liabilities total $1,025,000. Suzanne recalls from her accounting studies that estimating uncollectible accounts requires judgement. She has asked that Sam review his estimate percentages to reduce the allowance from $100,000 to $40,000. She believes this will better reflect the company’s “real” liquidity. Instructions (a) Who are the stakeholders in this case? (b) Why did Suzanne request the adjustment? (c) Does the president’s request pose an ethical dilemma for the controller? (d) Is the president’s reason for reducing the allowance a valid one?
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