James Bright has just taken up the position of managing director following the unsatisfactory achievements of the previous incumbent. James arrives as the accounts for the previous year are being finalized. James wants the previous performance to look poor so that whatever he achieves will look good in comparison. He knows that if he can write off more expenses in the previous year, he will have lower expenses in his first year and possibly a lower asset base. He gives directions to the accountants to write off as many bad debts as possible and to make sure accruals can be as high as they can get past the auditors. Further, he wants all brand name assets reviewed using assumptions that the sales levels achieved during the economic downturn are only going to improve slightly over the foreseeable future. Also he mentions that the cost of capital has risen over the period of the financial crisis so the projected benefits are to be discounted at a higher rate, preferably at a much higher rate than that used in the previous reviews!
Required:
Discuss the accountant's professional responsibility and any ethical questions arising in this case?