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    Ethical issues in Accounting - Window Dressing

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    Atlantis Company sells computer components and plans on borrowing some money to expand. After reading a lot about earnings management, Andy, the owner of Atlantis, has decided that he should try to accelerate some sales to improve his financial statement ratios. He has called his best customers and asked them to make their usual January purchases by December 31. He told them he would allow them until the end of February to pay for the purchases, just as if they had made their purchases in January.

    What do you think are the ethical implications of Andy's actions?
    Which ratios will be improved by accelerating these sales?
    Would you advise Andy to proceed with this plan? Why or why not?

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    Solution Preview

    1. Any kind of manipulations and window dressing with the financial statements is ethically incorrect. One should present the correct picture to the people around whether they are creditors, shareholders, employees or general citizens. This is a question of ethical integrity both for the Atlantis and its customers. The customers ...

    Solution Summary

    This is a mini-case, which presents the case of an ethical dilemma for the accounting manager. The management wants to improve the financial statements of the company and is resorting to the practice of window dressing. The solution to this problem discusses how the accounting manager can deal with this ethical dilemma and whether resorting to window dressing actually works. How can the creditors or bankers detect the window dressing? The solution ends with an advice to Andy.