The controller of Diaz Fashions believes that the yearly allowance for doubtful accounts for Diaz…
The controller of Diaz Fashions believes that the yearly allowance for doubtful accounts for Diaz should be 2% of its accounts receivable balance at the end of the year. The president of Diaz, nervous that the shareholders might expect the company to sustain its 10% growth rate, suggests that the controller increase the allowance for doubtful accounts to 4%. The president thinks that the lower net income, which reflects a lower growth rate, will be a more sustainable rate for Diaz.
a. Who arc 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 Diaz’s growth rate? Explain your answer.