Richmond, Inc., operates a chain of 44 department stores. Two years ago, the board of directors of Richmond approved a large-scale remodeling of its stores to attract a more upscale clientele. Before fi nalizing these plans, two stores were remodeled as a test. Linda Perlman, assistant controller, was asked to oversee the fi nancial reporting for these test stores, and she and other management personnel were offered bonuses based on the sales growth and profi tability of these stores. While completing the fi nancial reports, Perlman discovered a sizable inventory of outdated goods that should have been discounted for sale or returned to the manufacturer. She discussed the situation with her management colleagues; the consensus was to ignore reporting this inventory as obsolete because reporting it would diminish the fi nancial results and their bonuses. Managerial Accounting and the Business Environment 27.
Required:
1. According to the IMA's Statement of Ethical Professional Practice, would it be ethical for Perlman not to report the inventory as obsolete?
2. Would it be easy for Perlman to take the ethical action in this situation?