Astin Blair is the manager of a medium-size company. A few years ago, Blair persuaded the owner to base a part of his compensation on the net income the company earns each year. Each December he estimates year-end financial figures in anticipation of the bonus he will receive. If the bonus is not as high he would like, he offers several recommendations to the accountant for year-end adjustments. One of his favorite rocemmendations is for the controller to reduce the estimate of doubtful accounts.
1-What effect does lowering the estimate for doubtful accounts have on the income statement and balance sheet?
2- Do you believe Blair recommendation to adjust the allowance for doubtful accounts is within his right as manager, or do you believe this action is an ethics violation? Justify you response
3- What type of internal controls might be useful for this company in oversseing the managers recommendations for accounting changes?