Susan Applies for a Loan Susan Spiffy, owner of Spiffy Cleaners, a drive-through dry cleaners, would like to expand her business from its current location to a chain of cleaners. Revenues at the one location have been increasing an average of 8% each quarter. Profits have been increasing accordingly. Susan is conservative in spending and is a very hard worker. She has an appointment with a banker to apply for a loan to expand the business. To prepare for the appointment, she instructs you, as chief financial officer and payroll clerk, to copy the quarterly income statements for the past two years but not to include a balance sheet. Susan already has a substantial loan from another bank. In fact, she has very little of her own money invested in the business.

Required
Before answering the following questions, you may want to refer to Exhibit 1-9 and the related text on pages 29 and 30. Support each answer with your reasoning.
1. What is the ethical dilemma in this case? Who would be affected and how would they be affected if you follow Susan’s instructions? (Would they benefit? Would they be harmed?) What responsibility do you have in this situation?
2. If the banker does not receive the balance sheet, will he have all of the relevant and reliable information needed for his decision-making process? Why or why not? Will the information provided by Susan be free from bias?
3. What should you do? Might someone be harmed by Susan’s accounting decision? Explain.