Ethical Situation Case Study

Al Nagma Company has a policy that the executive manager is eligible for annual incentives based on his performance. These intensives are given at the end of the year if the companys net profit has raised by 5% compared with the previous year. At the end of the current year, the executive manager noticed that the company wont be able to achieve the target of 5% increase in net profit because the net profit for this year is less than last years. So, the executive manager called the accountant Ahmed and asked him to increase this years expenses. Ahmed was shocked from this request and asked the manager for more clarifications. The manager told Ahmed since were unable to accomplish the targeted net profit for this year, then we must raise our expenses as much as we can so that our income next year will look better comparing to current years decreased net income. The manager justified this request by saying since we couldnt accomplish our projected target, the income has decreased and as a result the companys share value will surely decrease this year regardless of the decreases in income. Therefore, let's make this basically bad year a really bad one.

The requirements:

1. Is there a problem facing Al Nagma Co. accountant?

2. Who are the related parties affected with this issue?

3. What alternatives do you suggest for this problem?

4. What is your advice for the accountant?