The Alert Company is a closely held investment service group that has been very success¬

ful over the past five years, consistently providing most members of the top management group with 50 percent bonuses. In addition, both the chief financial officer and the chief ex¬

ecutive officer have received 100 percent bonuses. Alert expects this trend to continue.

Recently, the top management group of Alert, which holds 35 percent of the outstand¬

ing shares of common stock, has learned that a major corporation is interested in acquiring Alert. Alert's management is concerned that this corporation may make an attractive offer to the other shareholders and that management would be unable to prevent the takeover.

If the acquisition occurs, this executive group is uncertain about continued employment in the new corporate structure. As a consequence, the management group is considering changes to several accounting policies and practices that, although not in accordance with generally accepted accounting principles, would make the company a less attractive acqui¬

sition. Management has told Roger Deerling, Alert's controller, to implement some of these changes. Deerling has also been informed that Alert's management does not intend to dis¬

close these changes at once to anyone outside the immediate top management group.

Required:

Using the code of ethics for management accountants, evaluate the changes that Roger's management is considering, and discuss the specific steps that he should take to resolve the situation. (CMA adapted)