Question
Even so, the company president believes that a large dip in the current year's profits could cause a significant drop in the market price of
Even so, the company president believes that a large dip in the current year's profits could cause a significant drop in the market price of Eaton's stock and make it a takeover target. To avoid this possibilitiy, he urges Mark Trane, Controller, to accrue every possible revenue and to defer as many expenses as possible in making this period's year-end adjusting entries. The president says to Mark, "We need the revenues this year, and next year we can easily absorb expenses deferred from this year. We cannot let our stock price be hammered down!" Mark didn't get around to recording the adjusting entries until January 17th, but he dated the entries December 31 as if they were recorded then. Mark also made every effort to comply with the president's request.
What are the ethical considerations of the president's request and Mark's dating the adjusting entries December 31? Can Mark accrue revenues and defer expenses and still be ethical?
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