Ethics in Accounting: Consider the following case as an example of ethical dilemmas accounting professionals can face.

Dilemmna: Patricia Green CPA is a Blythe Corporations Controller and she is concerned that the companys net income may be lower this year than was expected. As a result, she is afraid that the Corporate executives may recommend cost reductions by laying off accounting staff. Patricia knows that depreciation is a major expense for Blythe Corporation. The company currently uses the double-declining balance method, and she is thinking of changing to the straight-line method.

Alternative 1) However, this change would be highlighted in the statement of retained earnings as a cumulative effect adjustment and management must prove that the new principle will give a reliable and more relevant financial presentation in the statements.

Alternative 2) Instead, she is contemplating increasing estimated useful lives and residual values. That would decrease depreciation expense (and increase income). Best of all, this change in estimate will be handled prospectively and would not be highlighted in the current or future years financial statements. Patricia thinks this approach could save her job and those of her staff.

What would you recommend to Patricia Green? On the one hand, it would seem that opting for changes in residual values and useful lives could result in investors and creditors getting less useful information about Blythes income. On the other hand, Patricia may feel she has an obligation to protect her staff.

Requirements: Apply the Guidelines for Ethical Conduct

The following questions should help you identify and sort out the questions to be considered

1. Identify the consequences and its effects on others. Seek answers to the following questions in this sequence: a. What parties (stakeholders) may be harmed or benefited? b. Whose rights or claims may be violated? c. Which specific interests are in conflict?.

2. Consider your obligations and responsibilities to the various stakeholders. What is the effect of each alternative on the various stakeholders? Which stakeholders are harmed or benefited most?

3. Make a decision that is fair and ethical to those affected.

It may help to research the internet for articles regarding various thoughts on ethics. Be sure to provide material references for material included in your report.