The controller of Shirt Co. believes that the yearly allowance for doubtful accounts for Shirt Co. should be 2 percent of net credit sales. The president of Shirt Co., nervous that the stockholders might expect the company to sustain its 10 percent growth rate, suggests that the controller increase the allowance for doubtful accounts to 4 percent. The president thinks that the lower net income, which reflects a 6 percent growth rate, will be a more sustainable rate for Shirt Co.

(a) Who are the stakeholders in this case?

(b) Does the president’s request pose an ethical dilemma for the controller?

(c) Should the controller be concerned with Shirt Co.’s growth rate in estimating the allowance? Explain your answer.