The Alert Company is a closely held investment service group that has been very successful 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 executive officer have received 100 percent bonuses. Alert expects this trend to continue.

Recently, Alert’s top management group, which holds 35 percent of the outstanding 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 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 ac-

counting principles, would make the company a less attractive acquisition.
Management has told Roger Deerling, Alert’s controller, to implement some of these changes. Roger has also been informed that Alert’s management does not intend to disclose these changes immediately to anyone outside the top management group.
Required:
Using the code of ethics for management accountants, evaluate the changes that Alert’s management is considering and discuss the specific steps that Roger should take to resolve the situation. (CMA adapted) lop5