You are in your second year as an auditor with Regis and Dantly, a regional CPA firm. One of the firm's long-time clients is Mayberry-Cleaver Industries, a national company added in the manufacturing, marketing, and sales of hydraulic devices used in particular manufacturing applications. Early in this year's audit you find out that Mayberry-Cleaver has changed its method of evaluating inventory from LIFO to FIFO. Your client's explanation is that FIFO is consistent with the technique used by some other companies in the industry. Upon further investigation, you find out an executive stock option plan whose terms call for a important increase in the shares available to executives if net income this year exceeds $44 million. Some quick calculations induce you that without the change in inventory methods, the target can't be reached; with the change, it will.
Required:
Do you recognize an ethical dilemma? What would be the likely impact of subsequent the controller's suggestions? Who would benefit? Who would be injured?