Professional and Ethical Behaviour}

Ryan is the owner of Northjet Inc., a regional airline company that has been operating out of Ontario for the last eight years. During those eight years, he has taken the company from three employees to a staff of over 40 , including pilots, baggage handlers, and other administrative employees. Revenues also have increased significantly during this time. The airline industry is a competitive one, and he has always known that he doesn't want to stay in this business forever. Once the company establishes itself, he wants to sell it for top dollar and move on to his next business venture.

Ryan was recently talking with his friends David and Bruno, who are entrepreneurs at heart. They have been looking for a new business opportunity and mention that they would be interested in taking over Northjet Inc., if Ryan is looking to sell.

Ryan enters into negotiations with David and Bruno and settles on a price. It is agreed that they will pay five times multiple of earnings. They all agree that they don't need to involve the lawyers and accountants, as that would just delay the purchase and cost everyone more money. Ryan mentions that they have all been friends for years and can trust one another with the deal.

David and Bruno say they expect up-to-date financial statements by next week so they can finalize the deal. Ryan promises them that they will have them by next Friday.

Sam, a Chartered Professional Accountant, an employee of Northjet Inc., comes into Ryan's office during the week and mentions that he heard that Northjet Inc. might be sold in the next week or so. Sam asks him to let him know if anything has to be done. Sam says he's assuming that the purchasers' accountants will contact him directly, but he has heard nothing yet. Two days after this initial discussion, Sam comes back into the office and starts asking a few questions regarding the liabilities account. He recalls the \(\$ 100,000\) roof expense that was incurred two weeks ago on the apron, the area where the airplanes are parked when they're not in use. The roof collapsed and had to be repaired on an emergency basis.

Sam can't understand why this expense wasn't recorded in the financial statements even though it hasn't been paid yet. Clearly, it is an expense and under accrual accounting should appear on the financial statements as a liability owing. Ryan quickly tells Sam not to worry about it, and says that he already notified the purchasers that the large expense would not be in the financial statements.
Ryan tells Sam to have those final statements on his desk by tomorrow morning.
\section*{Required:}
Identify and discuss any accounting issues and potential ethical issues.