Will sales and profits meet the expectations of investors and Wall Street analysts? Managers at public corporations must answer this vitally important question quarter after quarter, year after year. In an ideal world—one in which the economy never contracts, expenses never go up, and customers never buy competing products—the corporation’s share price would soar, and investors would cheer as every financial report showed ever-higher sales revenues, profit margins, and earnings.

1. What are the ethical and legal implications of using accounting practices such as the book-and-hold technique to inflate corporate earnings?
2. Why would Commodore’s auditor insist that Rob document any sales booked under the book-and-hold technique?
3. If you were in Rob’s situation, would you agree to use the book-and- hold technique this month? Justify your decision.
4. Imagine that Commodore has taken out a multimillion-dollar loan that must be repaid next year. How might the lender react if it learned that Commodore was using the book-and-hold method to make revenues look higher than they really are?