Janet is the head of the sales Department for a large book distributor. She manages a team ofsales people, including her close friendEmma. Each salesperson is responsible forparticular productline and is entitled to receive a bonus provided that, he or she exceeds the profit forecast for his/her product group by more than 10 percent.Profit for each product group is estimated by deducting from sales revenue, the cost of books sold plus a charge for corporate overhead. Corporate overheads are charged as the percentage of sales revenue using a complex formula based on different percentages of revenue for different product lines: and salespeople can never make any sense of their annual overhead charge.

As the year end approachesLyer, who sells religious and philosophical text learns from the accountant StanleyRiteousthat she will not receive a bonus as she will not achieveher annual profit forecast. She's feeling very frustrated as she has heard that, the rest of the sales team will come with more than 20% above their forecast.

LyerapproachesRiteoussuggesting that an accounting entry is made to move some of the overhead charges to the other salespeople who after all will still earn their bonus.Riteousrefuses on the ground that he is a CPA but he is subsequently instructed by Kanivatomakethis journal entry.

Required.

Explain how the bonus system is leading to unintended behaviour or comes.

What relevance doesRiteousCPA status have to the situation?

How shouldRiteusrespond to Kaniva's instruction to move over her charges fromLyerto the other sales people explain your answer?