Please read the case study below: What are the ethical issues in the case? Explain how these ethical issues are related to accounting policies that must be followed. Who are the impacted stakeholders and how are they impacted? What recommendations would you suggest? Make sure to include the rationale for any recommendations you make.

Case Study

Jos Sanchez smiled as he drove home. After two grueling weeks, he had finished the financial statements for NTW Co. Jos had worked with NTW's management team for two years, helping with their taxes and providing other financial expertise. Now, the company had a chance to grow, and the management team had turned again to Jos for help. While it had been a lot of work to convert NTW's records from basic tax records to Generally Accepted Accounting Principles (GAAP), Jos knew it would really help his client.

Reaching his car, Jos stopped thinking about his client and considered his own company, DBS Consulting. It was not really his company. Although Jos was one of several consultants, he was the only accounting expert. Most of DBS Consulting's work was in marketing, negotiations, and technology, but three years ago two large clients had asked for accounting help, and Jos had been hired to provide it. This had been a good move for him.

His thoughts turned back to NTW as he pulled into his driveway. Now that the first set of books was done, he would help them design and implement a formal accounting system. By the time he completed the system, NTW would have a strong accounting team, and Jos would be the one they recommended to their friends and business associates who needed a little help with their books. Jos loved his job!

MEETING WITH NTW

"Jos! It is good to see you," Himari Sato said as she greeted him the next morning at NTW's offices. He loved working with Himari who was from Japan but had been hired as an engineer for NTW after completing a graduate degree in the U.S. She was now their lead engineer. Himari respected numbers and their importance, especially in business, and often helped Jos explain the numbers to the rest of NTW's team. For the last few months, he had been working closely with Himari, helping her choose continuing education courses in finance and accounting, so she could transition into the chief financial officer (CFO) slot the company was creating. It would be a good fit for her with a bit more training.

"What can I do for you today?" Jos asked Himari as he sat down. "You sounded a little upset when you called."

"It is about these financials," she said. "They look good."

"Of course, they do. You've made sound financial decisions with my help, of course," he added with a smile. "And you sell great products. Why wouldn't they look great?"

Himari smiled. She asked, "Do you ever have bad news?"

"Not if I can help it. It's my job to help you avoid bad news" said Jos, "or to find ways to make bad news less negative. Let's take a look at your numbers."

For the next hour, Jos walked Himari through NTW's new financial statements. Himari was sharp, asking good questions and waiting patiently for full answers. Finally, she sat back in her chair nodding and said, "That all makes sense, but we have one last problem."

Jos frowned and asked, "Problem?"

"Yes. Our bank told us yesterday that one year of GAAP financials would not be sufficient. They need official numbers for at least three years."

"Do they want full statements?" Jos asked.

"No. They need key financial indicators for those previous years and certification that they were calculated using GAAP," Himari said. She handed Jos a list of account balances and ratios.

Jos nodded. "I have those numbers using the old system, and I believe they'll be close to the GAAP numbers," he explained. "But we can't be sure until we do the conversion, which leaves two options. Either we find another bank, or we start working on calculating those other numbers."

"How long will it take to calculate the indicators they need using GAAP?" she asked. Jos sighed and said, "Two or three weeks."

"Isn't there some way you could speed up the process? This loan is very important for our company," she said.

Jos shook his head. "No," he said. "We need to do it the right way to make sure that we satisfy the bank and avoid trouble later."

Himari shook her head. "That will not work, then," she said. "We must find another way." She stood up. "I will talk with the management team and get back to you once we have a plan." She bowed slightly. "Thank you for your time today."

MEETING WITH AYO BOTHA

Jos sighed as his boss, Ayo Botha, stepped into his office. Ayo had recently come to DBS Consulting and was anxious to make a good impression, but Jos did not really approve of the methods Ayo used. Every meeting ended up being a bit of a challenge, usually requiring Jos to bite his tongue and count to 10. Somehow, looking at Ayo's face, he doubted that today would be any different.

"I have good news for you," Ayo said, as he sat down in one of Jos's office chairs. "You don't have to worry about doing two more years of GAAP records for NTW."

"Really? Did they find another company to do the conversion for them?" Jos asked.

"Of course not. Losing a client would not be good news. Himari told me about your conversation and how you said the numbers were very similar between the two systems. So, I called the bank and told them that the numbers were ready and that we had verified them."

"But those numbers weren't GAAP!" Jos exclaimed, shocked by what Ayo was saying.

"They didn't ask me if they were GAAP, so I didn't say anything; I just left out a detail," said Ayo. "Our client is pleased, and you should be, too, since I'm sure this will bring in more finance business."

Ayo stood up. "Anyway, I'll let you know when NTW is ready for more help."

Jos just stared as his boss left the room. He had never liked confrontation, but he could not let this pass, could he? No, he needed to do something. If only he could figure out what.